Net Neutrality a Bad Idea For Small Business

network-cables internet public domainI think it will be quite a while before all the dust settles that got kicked up during the FCC net neutrality power grab, so it is difficult to comment on many of the specifics of the regulations.

However, let’s look at the larger picture for a few moments. Much of what I’ve been hearing from the FCC regulators sounds like, “Hello Small Business, we’re from the government and we’re here to help you.”

Unfortunately, proponents and opponents have both claimed to be the protectors of small business in this debate. Those in favor of the FCC regulations said repeatedly that without this version of net neutrality it will be difficult for a startup to challenge Netflix.

Why regulate now?

Whether or not that’s true I can’t say. However, what I do know is that of the hundreds of thousands of small businesses across our land, few – if any – have plans on challenging Netflix and this brings us to the real cause of the debate: a squabble between Netflix and Comcast. Rather than let this commercial fight play out in the courts and marketplace, the FCC decided to step into the fray. Further, I think President Obama’s vocal support for net neutrality must have been a major factor in the FCC’s decision to become so deeply involved.

In any case, pending the legal battles that will surely ensue now, the FCC is positioned to regulate the Internet. With the exception of those involved in the Netflix-Comcast fight and a cadre of activists, I think most individual consumers and small business owners are generally okay with the performance of the Internet. They haven’t been crying out for regulation from Washington and this brings us to the main point.

The de-regulation era ends?

The last 30-40 years has been one of government de-regulation and in all cases, competition has increased when industries were deregulated. Some of us remember when airlines were deregulated; that created the entire market segment of “low-cost” airlines. Our long distance phone service was deregulated and the monopolistic AT&T broken into “Baby Bells.” Soon after that local phone service was deregulated.

Deregulation opened the way for competitors. Companies like MCI and Sprint were able to get into the phone business. Long distance rates went down and success in the traditional phone business marketplace paved the way for the competition among cell phone providers that we have today.

Have you ever seen government regulators increase competition, innovation, or supply? Have government regulators ever lowered the barriers to entry for any industry?

The FCC ruling makes the Internet a utility like electricity. Over the last decade has anyone seen electricity rates come down and the supply of electricity increase in the same way as we have seen Internet connectivity improve in both availability and speed?

I don’t think it’s going too far to say that small businesses, via their websites, have enjoyed tremendous entry into people’s homes and lives because of the build out and improvements in the Internet over the years. Would this have happened so quickly – or ever – had the Internet been under the control of government regulators?

Who will pay for improvements?

The basic law of economics – There’s no such thing as a free lunch – applies here. Someone will pay for any improvements to the Internet. If it isn’t the major corporate users who are charged higher rates, it will be the general consumers and that includes your small business.

Consider our highway system. It is entirely regulated by the federal and state governments. Every year we hear that it is falling apart and needs dramatic improvements to its infrastructure. I should also mention that one strategy some states have used to improve critical highways is to privatize and “deregulate” them, making them privately operated toll roads that are paid for by those who use them.

So what can we conclude about the FCC’s net neutrality? It’s very likely that:

  • Innovation will be dampened,
  • Infrastructure improvements will be slowed,
  • Competition will decrease, and
  • Costs will go up to the consumer.

I don’t see anything in that list that is good for the thousands of small business owners I have had the pleasure to meet over the years.

Sponsored by AT&T