‘Net Neutrality’ — The Government Holding Us Back

By April 13, 2007General

There’s always room for a Furchtgott-Roth on this page, in this case, Harold Furchtgott-Roth, former FCC commissioner who now runs Furchtgott-Roth Economic Enterprises. In a New York Sun column, Furchtgott-Roth notes the soon-to-be released OECD study of national broadband penetration (the United States ranked 12th in the world as of the last study with data going through December 2005).

Furchtgott-Roth detects no relationship between economic growth and broadband penetration, but certainly sees the advantages in technological innovation. However, government adoption of an Internet industrial policy — which would include “net neutrality,” we assume — is an inefficient way to achieve the goals of penetration and innovation, he argues.

Throughout the country’s history, Americans have embraced technological advances largely without the prodding of government programs. It is a land with an abundance of resources and a shortage of labor. Americans have always been the beneficiaries of new technologies chosen by rational consumers, and broadband should be no different.

Now, many politicians, including some running for president, alarmingly tell us to forget both logic and the past. They say broadband is a different form of technological change, one for which practically every other country in the world has adopted a unique and costly form of industrial policy: various combinations of subsidies, tax breaks, regulations, and political speeches.

Broadband is a wonderful new technology, but while it may have reinvented politics, the same is not true for economics. The economic factors that determine technological diffusion and employment — available technologies, relative prices, and income — are the same as ever. The soundest economic policies for America, or any country, are the same as ever: clear and enforceable property rights, simple tax structures, and confidence in the economic decisions of individuals.

Regulating or legislating for the abstract idea of fairness — fairness in the sense of creating a permanent advantage for those who want profitable access to ever-increasing broadband speed and volume — would simply erect obstacles to private-sector innovators motivated by profit, discouraging the creation or expansion of new broadband services. If government wants to be truly neutral, it should just stay clear of the Internet.