In an article I wrote several years ago (“Free Market Reforms and the Reduction of Statism,” The Freeman, Sept. 1, 2008), I stated some principles that are relevant to the current debate on “net neutrality”:
Some forms of state intervention are primary. They involve the privileges, subsidies, and other structural bases of economic exploitation through the political system. This has been the primary purpose of the state: the organized political means to wealth, exercised by and for a particular class of people. Some forms of intervention, however, are secondary. Their purpose is stabilizing, or ameliorative. They include welfare-state measures, Keynesian demand management, and the like, whose purpose is to limit the most destabilizing side-effects of privilege and to secure the long-term survival of the system.
Unfortunately, the typical “free market reform” issuing from corporate interests involves eliminating only the ameliorative or regulatory forms of intervention, while leaving intact the primary structure of privilege and exploitation.
The strategic priorities of principled libertarians should be just the opposite: first to dismantle the fundamental, structural forms of state intervention, whose primary effect is to enable exploitation, and only then to dismantle the secondary, ameliorative forms of intervention that serve to make life bearable for the average person living under a system of state-enabled exploitation….
When the state confers a special privilege on an occupation, a business firm, or an industry, and then sets regulatory limits on the use of that privilege, the regulation is not a new intrusion of statism into a free market. It is, rather, the state’s limitation and qualification of its own underlying statism. The secondary regulation is not a net increase, but a net reduction in statism.
On the other hand, repeal of the secondary regulation, without an accompanying repeal of the primary privilege, would be a net increase in statism. Since the beneficiaries of privilege are a de facto branch of the state, the elimination of regulatory constraints on their abuse of privilege has the same practical effect as repealing a constitutional restriction on the state’s exercise of its own powers.
We see this focus almost entirely on the secondary regulations, to the exclusion of primary interventions, in the mainstream libertarian debate on net neutrality. For example, in the latest anti-net neutrality article at Reason (Nick Gillespie and Robert Mariani, “Net Neutrality, Title II Proponents ‘Assume Nothing Has Changed’ Since 1995,” Feb. 23), the authors cite “telecom activist” Daniel Berninger in arguing against Obama’s proposal to extend Title II “common carrier” status to Internet service providers. To do so, Berninger warns, would “essentially destroy innovation.” Fortunately, he reassures us, everything is just fine as it is.
Berninger argues that virtually all the problems that proponents of Title II regulation and Net Neutrality worry over — such as the blocking of specific websites and the deliberate slowing of traffic — haven’t occurred precisely because ISPs are subject to market competition and must constantly innovate to keep customers happy.
Anyone who regularly follows Mike Masnick’s coverage of telecom issues at Techdirt might be pardoned for suspecting that all this competition and innovation, with attendant rising connection speeds and falling rates, is happening in an alternate universe. Here in the regular universe the rest of us live in, unlike Berninger’s Bizarro world, the so-called “competition” and “innovation” in the telecom industry more closely resembles Paul Goodman’s description of a classic oligopoly market, with three or four players “competing with fixed prices and slowly spooned-out improvements.”
Back in 2006 Berninger himself, far from talking about how rosy and competitive things were, was emphasizing the special privileges the telecoms had received. And back then he opposed net neutrality because it would prevent enforcing common carrier status on these privileged monopolies.
In the ongoing argument about network neutrality, it’s been pointed out that the telcos have abused the public benefits they’ve received, but Daniel Berninger, points out another public resource they’ve been given that they’d rather we all overlook: tremendous amounts of state-owned right-of-way across the country. The real meat of Berninger’s argument, though, is that in many cases, the state laws giving telcos this right-of-way access require them to act as common carriers — meaning that they can’t discriminate against content, and that net neutrality may already be enshrined in local laws….
In fact, telecoms collected around $200 billion in excess rates in return for a promised fiber-optic buildout they never delivered on. They were given these rate hikes back in the ’90s in return for their promise to build local fiber-optic infrastructure for high-speed Internet access — something like the ultra-high-speed, reasonably priced Internet service widely available in Western Europe. Then they just pocketed the money and never built the infrastructure. In fact fiber-optic construction is down about 60% now, and prices are exorbitant. The caps and other fine print mean the service I get from AT&T costs over $100 most months, with constant service slowdowns, fadeouts and flat-out disconnections. After repeated complaints and service calls to see what the problem was, I was finally told by a service rep they were basically just not going to come out any more because there was nothing obviously wrong and I was more trouble than I was worth. Comcast’s “customer retention associates” are notorious for bullying customers into staying, and employees do nifty things like changing customer names on billing addresses to insults and slurs. That’s not the kind of thing that happens in a competitive market where companies “must constantly innovate to keep customers happy.” It’s what happens when your only choices between the wireless monopoly on whatever terms it offers, and dialup service. From what I hear, most customer experiences with AT&T, Cox, Verizon and Comcast are similar.
And on top of all this, the telecoms put enormous lobbying efforts into passing state laws against competition. In Chattanooga, “the Gig” is a municipal wireless network using spare capacity of a local fiber-optic infrastructure originally created for the electrical utility. It offers a gigabyte per minute — about fifty times the national average — for a modest $70 a month (I tested my wireless connection speed just now at about 1.1 megabyte per minute — thanks, AT&T!).
Hundreds of municipalities across the country have similar infrastructures, created to serve local governments or school districts, that could offer service like Chattanooga’s and bring genuine competition into local wireless markets. But that’s illegal in about half the states, thanks to telecom lobbying. ISPs say it would be “unfair” to have to compete with low-cost, high-quality municipal service when they invested all that money in their own infrastructure on the assumption they could make it back in service rates. Only, as we saw above, they didn’t invest all that money in building infrastructure. They just robbed consumers of hundreds of billions for nothing.
And now, like classic monopolists, they want to engage in price discrimination based on how much the customer can afford to pay.
Against this background of monopoly privilege and extortion, are net neutrality rules an increase in government intrusion into the market? Or are they a partial restriction on a previous state grant of enormous, abusive power to the telecoms? You tell me.
As I see it, the telecom monopolies amount to nothing more than a branch of the state, and their extortionate rates are just state-enabled robbery. Given the special privileges they’ve been granted — free rights of way, hundreds of billions in excess charges for promises they didn’t deliver on, restrictions on real competition — net neutrality is just a very modest restriction on their state-granted power to abuse us.
That’s not to say I favor net neutrality as an ideal solution. Just that, so long as those primary grants of privilege are in place, a “libertarian” debate centered entirely on whether or not to restrict the abuse of such privilege is nothing but a sham.
Rather than net neutrality, I would far prefer a genuine free market reform based on removing all those privileges. I’d remove all legal restrictions on cheaper, higher quality wireless competition from municipal fiber-optic infrastructure — preferably with the local wireless service run as a consumer cooperative rather than by government. I’d also let ratepayers take back that $200 billion they were robbed of in the form of muni wireless cooperative equity in the telecom companies. Or maybe just seize the fiber optic infrastructure from Verizon, Comcast et al and march the boys in the C-suites to the guillotine — that’s always an option, too.
