The FCC Needs To Abolish A Lot More Than Net Neutrality

Authored by Sam Estep via The Mises Institute,

The end of the Obama administration"s regulatory regime known as net neutrality has brought with it prophecies of impending doom from across the political spectrum. Leaving aside the hyperbole, most objections stem from concerns that Internet service providers (ISPs) will start “discriminating” by offering preferential speeds and bandwidth allocation to certain websites or companies that pay for a higher tier of service. ISPs would, therefore, start to throttle the Internet speeds of normal users. This may well be the result, however, imposing stifling regulations that cement the current dominant players is only going to make to situation worse.

The reasons ISPs might be inclined to engage in these practices are mainly twofold: one, ISPs lack any competition in many parts of the country. Two, Internet traffic is increasing and ISPs are looking for ways to raise capital in order to accommodate that growth.

Before we address these issues it is worth making an important distinction: so-called “net neutrality” isn"t simply a regulation, it is a total reclassification of the Internet from an “information service” to a “telecommunication service.” This may seem like simple semantics, but the latter classification has been around far longer, and has, consequently, accumulated a bevy of regulations and restrictions confining it.(In fact the classification “information service” was created specifically to help the Interet avoid the more stringent regulation of telephone and cable services.) The FCC’s goal in this reclassification was to bring the Internet under the purview of Title II of the Communications Act of 1934, specifically, SEC.202: 

It shall be unlawful for any common carrier to make any unjust or unreasonable discrimination in charges, practices, classifications, regulations, facilities, or services for or in connection with like communication service, directly or indirectly, by any means or device, or to make or give any undue or unreasonable preference or advantage to any particular person, class of persons, or locality, or to subject any particular person, class of persons, or locality to any undue or unreasonable prejudice or disadvantage.

However, this reclassification has far more implications than the above. One must only peruse a little further down Title II until they happen upon this passage from Sec 214:

No carrier shall undertake the construction of a new line or of an extension of any line, or shall acquire or operate any line, or extension thereof, or shall engage in transmission over or by means of such additional or extended line, unless and until there shall first have been obtained from the Commission a certificate that the present or future public convenience and necessity require or will require the construction, or operation, or construction and operation, of such additional or extended line.

Clauses like this have been particularly hard on Small ISPs, and were one of the main reasons for the FCC’s re-evaluation of net neutrality. Even though the Title II regulations no longer directly apply to ISPs, a lack of competition still thrives off the fact that the parent companies of most ISPs are telecommunication and cable firms, which are still covered under the act. Such “common carriers” are given benefits similar to public utilities, meaning their position is secured while prospective competitors must divert resources into lobbying the gatekeepers at the FCC for a certificate or waiver. But it isn"t just federal interference that hampers competition. Fees for so-called “rights of way,” in which local governments act as needless middlemen, are another impediment. Impositions such as these effectively give telephone and cable companies government granted monopolies over certain parts of the country.

Declassification of common carriers and public utilities, repeal of charters, as well as other government constructed barriers, would allow more regional providers to compete with national ones. Such a deregulation would force companies that have exceeded their ability to function effectively due to their size, but are still being protected from competition by regulations to fail. As Thomas Sowell describes in Basic Economics:

While there are economies of scale, there are also diseconomies of scale. There may be things that companies could do better if it were larger and other things it could better if it were smaller. Eventually, diseconomies of scale begin to outweigh the economies, so it does not pay a firm to expand beyond that point. This why industries usually consist of many firms, instead of one giant, super-efficient monopoly.

The idea of a dysfunctional economy of scale propped up by regulations isn"t just a theory.

Consider how regulatory reforms, such as the Airline Deregulation Act of 1978 and the Bermuda agreement (which allowed domestic airlines to compete internationally) exacerbated Pan-Am’s demise and opened the way for regional airlines that had previously been restricted to domestic flights, e.g. United Airlines and Southwest, to rise to prominence in subsequent years. Consequently, Airline ticket prices have been dropping ever since. More regulations, especially those imposed under Title II, only tighten the hold of already powerful businesses in the sector, as well as discouraging investment in the Internet all together.

Another similarity between ISPs and the airline industry is that ISPs overbook. Have you ever noticed that your files are not downloading as fast as your plan advertised, or that the Internet seems slow on some days? While many things can cause these issues, usually it"s down to the fact that most ISPs simply can"t handle all, or even most, of the data usage they have allotted their users. ISPs routinely throttle user speeds for this very reason. So, unless net neutrality were simply about the right of all internet users to be suppressed equally, allowing ISPs to create tiers of preferential service would afford users more control over the Internet, not less. 

Furthermore, due to the ever increasing demand for high quality streaming services, companies like Netflix and Youtube take up more and more bandwidth. Therefore, with increasing demand and supply decreasing in turn, ISPs will inevitably raise prices on data usage until supply can be increased. In a free market the high demand for internet services, coupled with the inability of the current lot of ISPs to fully provide the services they advertise, would lead to scores of startups and competitors. However, the innumerable amount of regulations and outright monopolistic grants of the status quo, only discourage investment exacerbating the problem. Likewise, the potential profits from a foray into the industry would have to be so high as to outweigh the capital and time wasted on convincing the FCC and local governments of the company’s benevolent intentions. Repealing regulations lowers the point at which entrepreneurs and investors are willing to startup invest in competitors that, in turn, increase supply, thus decreasing the incentive for ISPs to ration their limited capabilities by implementing higher tiers of service.

Perhaps most concerning is the claim is that, without net neutrality, ISPs will start splitting the Internet into packages as in Portugal. However, this neglects the important detail that Portugal is already under the jurisdiction of the EU’s net neutrality regulations. As well as the fact that the ISP accused of this was, in fact, offering extra data for specific content in addition to their standard plan, not as an exclusive service as was misleadingly claimed.

Many comparisons can be drawn between the current consolidation of ISPs and the monopoly power by enjoyed by AT&T until it’s dissolution via antitrust law. However, the most distinct similarity is the special relationship AT&T held with the US government, which culminated in AT&T"s nationalization in 1918. This uncannily mirrors the relationships that modern ISPs possess with local and state governments. Net neutrality was simply another government intervention to protect the “public interest” from “natural monopolies” despite the history of such pretenses being destruction of competition, consolidation, and eventual monopoly.

While it may be gone for now, unless a larger deregulation occurs, the increasing consolidation of the ISP industry will inevitably be blamed on net neutrality’s elimination.

Net Neutrality – The End Of Google"s Biggest Subsidy

Authored by Tom Luongo,

Net Neutrality is gone.  Good riddance.

Lost in all of the theoretical debate about how evil ISPs will create a have/have-not divide in Internet access, is the reality that it already exists along with massive subsidies to the biggest bandwidth pigs on the planet – Facebook, Google, Twitter, Netflix and the porn industry.

Under Net Neutrality these platforms flourished along with the rise of the mobile internet, which is now arguably more important than the ‘desktop’ one in your home and office. 

Google and Apple control the on-ramps to the mobile web in a way that Net Neutrality proponents can only dream the bandwidth providers like Comcast and AT&T could.

Because, in truth, they can’t.  Consumers are ultimately the ones who decide how much bandwidth costs, not the ISPs.  We decide how much we can afford these creature comforts like streaming Netflix while riding the bus or doing self-indulgent Instagram videos of our standing in line at the movies (if that’s even a thing anymore).

Non-Neutrality Pricing

Net Neutrality took pricing of bandwidth out of the hands of consumers.  It handed the profits from it to Google, Facebook and all the crappy advertisers spamming video ads, malware, scams, and the like everywhere.

By mandating ‘equal access’ and equal fee structures the advertisers behind Google and Facebook would spend their budgets without much thought or care.  Google and Facebook ad revenue soared under Net Neutrality because advertisers’ needs are not aligned with Google’s bottom line, but with consumers’.

And, because of that, the price paid to deliver the ad, i.e. Google’s cost of goods sold (COGS), thanks to Net Neutrality, was held artificially low.  And Google, Facebook and the Porn Industry pocketed the difference.

They grew uncontrollably.  In the case of Google and Facebook, uncontrollably powerful.

That difference was never passed onto the ISP who could then, in turn, pass it on to the consumer.

All thanks to Net Neutrality.

Undercapitalized Growth

With the rise of the mobile web bandwidth should have been getting cheaper and easier to acquire at a much faster rate than it has.  But, it couldn’t because of Net Neutrality.  It kept rates of return on new bandwidth projects and new technology suppressed.

Money the ISP’s should have been spending laying more fiber, putting up more cell towers, building better radios went to Google to fritter away on endless projects that never see the light of day.

The ISP’s actually suffered under Net Neutrality and so did the consumers.

And therefore, Net Neutrality guaranteed that the infrastructure for new high-speed bandwidth would grow at the slowest possible rate, still governed by the maximum the consumer was willing to pay for bandwidth, rather than what the consumer actually demanded.

And, once obtained that power was then used to punish anyone who held different opinions from the leadership in Silicon Valley.

Think it through, Net Neutrality not only subsidized intrusive advertising, phishing scams and on-demand porn but also the very censorship these powerful companies now feel is their sacred duty to enforce because the government is now controlled by the bad guys.

Getting rid of Net Neutrality will put the costs of delivering all of this worthless content back onto the people serving it.  YouTube will become more expensive for Google and all of the other content delivery networks.  Facebook video will eat into its bottom line.

The ISP’s can and should throttle them until they ‘pay their fair share,’ which they plainly have not been.

The Net effect of Net Neutrality is that your ISP may charge you more in the short run for Netflix or Hulu.  Or, more appropriately, Netflix and Hulu will have to charge you more and we’ll find out what the real cost of delivering 4k streaming content to your iPhone actually costs.

But, those costs will then go to the ISP’s such that they can respond to demand for more bandwidth.  Will they try and overcharge us?  Of course.  AT&T is just as bad as Google and/or Facebook.

But, we have the right to say no.  To stop using the services the way Net Neutrality encouraged us to through mispricing of service.  If the ISP’s want more customers then they’ll have to bring wire out to the hinterlands.

Inflated Costs, Poor Service

Net Neutrality proponents kept telling us this was the way to help keep the internet available to the poor and the rural.  Nonsense.  It kept the internet from expanding properly into the hinterlands.

I live just over the county line in rural North Florida.  To the south is a town with cable and DSL.   Between cable franchise monopolies retarding expansion across county lines and Net Neutrality keeping margins thin, my home was 10 years behind everyone else getting decent bandwidth to keep up with the needs of the modern Internet.

Bandwidth needs artificially inflated, I might add, by the misaligned cost structure engendered by Net Neutrality in the first place.

It took forever for my phone provider to upgrade the bandwidth across the county line.  I begged them for a second line for internet service, they wouldn’t even talk to me.  Why?  The return on that new line wasn’t high enough for them.

If Google was passing some of the profits from Adwords onto the ISPs I’d have multiple choices for high-speed internet versus just one DSL provider.

As always, whenever the political left tries to protect the poor they wind up making things worse for them.

The Ways Forward

The news is good for a variety of reasons. With Net Neutrality gone a major barrier to entry for content delivery networks is gone.

Blockchain companies are building systems which cut the middle man out completely, allowing content creators to be directly tipped for their work versus being supported by advertising no one watches, wants or is swayed by.

Services like Steemit and the distributed application already built and to be built on it point the way to social media cost models which are sustainable and align the incentives properly between producers of content and consumers.

Steem internalizes the bandwidth costs of using the network and pays itself a part of its token reward pool to cover those costs.  So, all that’s left is content producer and their fans.  Advertisers are simply not needed to maintain the network.

Net Neutrality was a trojan horse designed to replicate the old shout-based advertising model of the golden age of print and TV advertising.  It was a way to control the megaphone and promote a particular point of view.

Look no further than the main proponents of it.  George Soros and the Ford Foundation are two of the biggest lobbyists for Net Neutrality.  Only the political left and its Marxian fantasies of evil middle men creating monopolies fell for the lies, as they were supposed to.

The rest of us were like, “Really?  This is not a problem.”  And it wasn’t until you looked under the hood and realized all they stood to gain by it.

Now, with Net Neutrality gone the underlying problem can be addressed; franchise monopolies of cable and phone companies in geographic areas.  These laws are still in effect.  They still hang like a spectre over the entire industry.  Like Net Neutrality, these laws concentrate capital into the hands of the few providers big enough to keep out the competition.

So, instead of championing the end of franchise monopolies, which county governments love because they get a sizable cut of the revenue to fund non-essential programs, the Left made things worse by championing Net Neutrality.

That also needs to end.  Even if you believe that franchise monopolies were, at one point, necessary.  They are not now.  IP-based communication is now fundamentally different than copper wire for discrete services like phone and cable.  Let people run all the copper and fiber they want.  There’s plenty of room in the conduit running under our sidewalks and streets.

Let a thousand flowers bloom, as the great Lew Rockwell once told me.

Then and only then will the Internet be free.

How To Protect Your Online Privacy Now That Congress Sold You Out

Authored by Eric Limer via Popular Mechanics

All your private online data—the websites you visit, the content of your chats and emails, your health info, and your location—just became suddenly less secure. Not because of hackers, but because Congress just blocked crucial privacy regulations. This will allow your internet service provider to collect all your data and sell that info to the highest bidder without asking you first. Welcome to a brave new world.

A pair of resolutions, which passed through the Senate and House with exclusively Republican votes, roll back rules proposed by the Democratic leadership of the Federal Communications Commission during the Obama administration which, though passed in October, had not yet gone into effect.

The rules—which will be completely dead following the expected signature of President Trump—would have required ISPs to get explicit opt-in approval from customers before selling the following "sensitive data":

 

This doesn"t just mean that sharing that information without your explicit permission will be fine and dandy. Since the rules were rolled back through the Congressional Review Act, the FCC is also barred from creating any "substantially similar" rules down the line.

In theory, the information collected will be stored under some sort of ID separate from your actual name. But that"s a cold comfort considering the level of detail in this sort of information would make your identity a dead giveaway, and ISPs can hardly be trusted to keep your identifying information suitably safe from prying eyes. After all, they"ll be building dossiers any hacker would love to steal.

What to do? There are a few things you can do to try and keep your data safe, and while they aren"t necessarily easy or free, they"re worth it if you value your privacy.

Opt out with your ISP

Your ISP may not need your permission to sell your data, but you can still go to them and tell them not to do it. The catch, of course, is this requires you to be proactive, and there"s no real guarantee that this will protect you completely. Still, do it. Get on the phone or visit the website of your ISP and opt out of every ad-related thing—and into every privacy-related thing—you can find. The process can be a little arduous—often requiring the use of your ISP-given email address that you probably never use—and it may not take effect immediately either. All the better reason to do it now.

Time Warner/Spectrum customers can find their privacy dashboard here. Comcast customers can opt out of some targeted programs using these instructions. Verizon customers can find opt out options here. Remember, your phone company is technically an ISP too, so look up your options on that front as well.

Opting out is an important first step, but it is not enough to actually preserve your privacy. Your ISP is not necessarily giving you the opportunity to opt out of all its ad-targeting programs. As the policy counsel at the Open Technology Institute, Eric Null, told Gizmodo, it is "highly unlikely" the new FCC will go after ISPs that aren"t offering robust opportunities to opt-out.

Some smaller ISPs, which survive on small and satisfied customer bases as opposed to a large and captive audience, are more incentivized to protect your privacy with gusto. In fact, a whole host of small ISPs wrote a letter to Congress opposing this move. If you"re lucky enough to have the option of switching to one, now might be a good time.

Keep your data out of your ISP"s hands in the first place

Your ISP is uniquely suited to snoop on your information. Anything you put online has to pass through its hands. Email you send through Gmail, chats through Facebook Messenger—they all travel through your ISP before they reach the service that actually sends them on. But while it is impossible to cut your ISP out of this exchange entirely, you can hide the data as you are sending it.

Apps with end-to-end encryption can encrypt your private information on the phone or computer you"re using, ensuring that it is coded and protected through the entire delivery process. So while your ISP can see the data go by, they can"t make sense of it.

Secure chat apps like Signal will be crucial to keep your chats private not only from the government and hackers, but from your ISP. Just make sure these services have security measures that are open-source and trusted by experts who can help keep them honest. You can also encrypt data manually, using a standard like PGP, before you send it off into the web, but it can be an arduous process, because you have to ensure that the recipient has the means to decode that info and read it.

The most seamless solution is to pay for a Virtual Private Network—a VPN—which allows you to encrypt all the data that passes through your ISP. This means that while your ISP is still doing the work of hauling your data around, it can"t understand any of it. The downside to this is that VPNs (at least any VPNs you can trust) are not free. Most good ones will require a yearly subscription. Furthermore, you aren"t hiding your personal data from everyone, you are just entrusting it to the VPN instead of your ISP, so do your research and choose a VPN you trust not to sell you out. Fortunately, since VPNs exist exclusively to keep your data private, they are pretty incentivized to keep you happy.

The only one you can really trust to protect you is you.

The short and uncomfortable truth is this: Until more robust privacy protections are put in place, the burden of protecting your online data falls on you. Keep it in mind, do your research, and remember that your monopolized ISP has every reason in the world to sell you out and wring your data for every dime that it is worth. The only one you can really trust to protect you is you.