Net Neutrality: Government Can’t Know the “Correct” Price for Internet Service

The motives of net neutrality advocates differ. But the common thread among them is a general belief that internet service providers (ISPs) face no serious competition, and therefore overcharge both their supply-side (i.e., Netflix) and demand-side (internet users) customers and generally treat customers poorly.
In other words, ISPs have ‘natural monopolies’ that allow them to rake in profits without improving service to customers or dealing with different customer-types in an equitable manner.
This perspective gave rise to ‘net neutrality,’ which the Trump administration soundly condemned last week. This measure would have essentially transformed the internet into a public utility by regulating ISPs like other utilities (electricity, water, etc.). For convoluted reasons, regulators believe this will ensure internet service is distributed equitably among all who are willing to pay the going rate – no more up-charging big bandwidth-eaters (like Netflix), even at mutually-agreeable prices.
Underlying this perspective is the belief that we can decipher, in some way, the level of service that ought to be offered on the ISP market. To implement net neutrality, regulators would allegedly examine the ISP market and decide, on some grounds, that what exists ought to be different, and that such a change can only come about through government regulation.

This post was published at Ludwig von Mises Institute on Nov 27, 2017.

 

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