Obamacare for the internet. That was how, at the height of the 2014 primary season, the Republican presidential hopeful, Ted Cruz, referred to the net neutrality rules proposed by the Obama administration. Designed to safeguard equitable access to the internet, they were enacted the following year. But they suffered a significant, albeit expected, blow when the US telecoms regulator, chaired by a Trump appointee, voted to ditch them last Thursday.
Net neutrality is the principle that internet service providers should not be able to charge different content providers different prices for transmitting data to their consumers. Strong net neutrality rules would prevent a big company such as Netflix from paying an ISP to guarantee faster access to its content than its competitors, or offer unlimited data access to Netflix bundled in as part of a broadband or mobile contract.
Scrapping net neutrality could make the already uncompetitive US broadband market even less competitive. The majority of American consumers only have one choice of broadband provider offering acceptable speeds. Allowing ISPs to bundle different deals with unlimited access to different platforms risks leading to hundreds of confusing packages being offered to deliberately obfuscate price competition.
But the anticompetitive reach extends way beyond the United States. Allowing large and dominant content providers to pay more for better access to consumers will make it harder for the new tech upstarts in Silicon Valley to compete. This will dampen competition and choice the world over, including for us here in Britain.
The internet is a modern natural monopoly: companies such as Netflix and Facebook need a critical mass of users in order to be economically viable. The more dominant they are, the harder it is for their competitors to get to that critical mass.
Like any rational monopolist, these companies will exploit a lack of net neutrality to maintain their dominance to the detriment of consumers. Facebook has publicly come out in favour of net neutrality in the American public debate. But it is aggressively capitalising on the absence of net neutrality in the developing world, where it is seeking to quickly expand its eye-watering consumer reach encapsulated in the fact that a quarter of the world’s population now have a Facebook account. It has been pressuring mobile network providers to offer free access to a very limited slice of the internet, including Facebook, for consumers who cannot afford to pay for internet access, and without a hint of irony, self-labelling it “philanthropy”.
Internet service providers point to the fact that YouTube and Netflix between them consume half of internet bandwidth. How are they supposed to future-proof our broadband infrastructure if they can’t charge them for access to their customers?
This argument is a sham. The fundamentally uncompetitive broadband market means any extra revenues are far more likely to be pocketed by shareholders than invested in improving the infrastructure. And consumers are anyway already paying considerably for that data through their broadband packages.
That’s not to say that we don’t have a problem with a creaking infrastructure. Here in the UK, almost one in 10 households do not have access to acceptable broadband speeds, rising to over half in rural areas. Just 2% of UK households have the hyperfast direct fibre connections to the broadband network; in South Korea, Japan and Spain it is more than 60%. This is because the structure of our broadband market – while more competitive than the very low bar set by the US – provides too few incentives for long-term investment. While government has historically under-invested in the UK’s physical infrastructure, the problem is even worse for our digital infrastructure. Extending superfast broadband to Devon so it can be accessed by small businesses there would for many result in as profound an economic boost as investing in the railway lines linking the region to London.
So the fight for net neutrality must be seen in the context of an even bigger debate. Is the internet something to be ruled over by all-mighty private companies with little oversight from the state? Or do we recognise it as too fundamental to our security, to the way we communicate, and to our economy, to leave it vulnerable to the cowboy tactics so often deployed when the private sector spots an unregulated monopoly? The worldwide web’s founder, Sir Tim Berners-Lee, worries that “the system is failing”. He’s right. It’s time to finally treat his invention like the public utility it has definitively grown to become.
