FCC Chair Considers Killing Net Neutrality

Trump’s new FCC Chairman Ajit Pai is expected to debut his new strategy towards Internet regulation this week, in a speech expected to signal the beginning of the end for new neutrality. Advocates for free speech see this as an opening for pay for play access to content, over and above the fees that most pay for basic internet service. This policy prohibits an internet service provider (ISP) from favoring some content while blocking other sources. President Obama passed the net neutrality regulations in 2015 as part of push to treat the Web as a utility, instead of as a private resource.

FCC Chair Pai plans reversal on net neutrality.

Content Providers Concerned About Access to Consumers

The new direction is sparking criticism from various content providers who are worried that their shows could be unfairly throttled, or slowed, by ISPs. This is especially the case under the new models of media creation, where a competing ISP may collaborate with a company such as HBO or Amazon to produce a show. In these cases, the fear is that when a customer receives internet connectivity from a competing ISP, the shows may be streamed at a lower quality than shows produced by the ISP that the customer is paying for web access.

Could Segmenting Internet Service Lead to Better Results?

Opponents of net neutrality argue that government control of a private resource rarely leads to an equitable distribution of resources. It simply replaces consumer choice with selection by the government in the form of a big brother. By forcing all providers to give the same level of service, net neutrality may disincentivize innovation, as competing on better quality is no longer necessary.

Currently, even some public utilities offer different levels of service. For example, many electric companies offer substantial discounts to clients who are willing to have their air conditioning shut down during peak periods. Similarly, some customers might be willing to accept short term slowdowns of internet access in return for special prices, or alternatively, might be willing to pay more for access to certain shows at faster speeds.

True Internet Competition Is Still Lacking

However, that assumes that internet customers have access to competition. At the fastest download speeds of 100 Mbps, more than half of the households in the United States have no service provider capable of granting access. Even at the FCC’s current standard of 25 Mbps, three quarters either don’t have access at all, or only can use one service provider. This is effectively a monopoly which prevents customers from relying on the free market to remedy the problems net neutrality laws seek to address.

FCC Advocates for Additional Access for Under-served Areas

Pai doesn’t object to net neutrality on terms of fairness, but rather feels that ISPs do not meet the qualifications to be considered Title II public utilities. He also wants ISPs to focus more resources on providing access in underserved areas versus adding additional coverage in markets which already have at least one internet provider. The question is whether it is better to encourage competition, or to promote at least minimal access to every consumer. It will be difficult for the government to meet both goals.

FCC Leaves Door Open for Broadcasting Monopolies

This is not the first controversial step that Pai has taken since assuming his role in January. Earlier this month, the FCC voted to reinstate the UHF discount. This was a tool that allowed broadcasters to use creative accounting when determining how many viewers their stations were capable of reaching. In 2016, the FCC eliminated this rule, which substantially impacted media ownership, given that current laws prevent monopolies in which one broadcasting company owned stations which together could broadcast to more than 39 percent of the country. Critics say that the rules reinstatement will lead to mergers that will restrict the free market.

How Will the End of Net Neutrality Affect Trading?

Stocks for major ISPs such as Comcast and AT&T while go up, as these businesses will now be able to profit from selling enhanced services to content providers. The Dow and S&P 500 indices will also likely see a boost. While Google, Amazon, and Netflix may have to set aside increased capital to ensure content access to consumers, the speeds at which downloads may become available may encourage consumption, leading to higher revenues.