December 21, 2010 11:16AM

The FCC Should Not Regulate the Internet

The FCC moves forward with a proposal to regulate Internet service today. It's a bad idea.

The one thing that pleases me about the ongoing debate over Internet regulation is the durability of Tim Lee's November, 2008 Cato Policy Analysis, "The Durable Internet: Preserving Network Neutrality without Regulation." My introduction of it is a good synopsis.

The arguments against government regulation in the name of "net neutrality" have not changed: A good engineering principle is not made better if dogmatized and given to lawyers and bureaucrats to enforce as law. The FCC and its regulatory regime are almost sure to be captured by major ISPs and turned to their benefit, used to suppress competition and blunt innovation.

A premise of net neutrality regulation---and much other regulation---is that consumers can't be relied on to defend their own interests. Taking that premise, which I don't, it follows that regulators must step in. But that syllogism skips over an additional premise: that regulators can do a better job.

The Istituto Bruno Leoni (Italy) recently published a terrific paper by Slavisa Tasic (a former Cato intern) that applies the insights of behavioral economics to regulators. Academics have typically used behavioral economics to illustrate the fallibility of market actors, but Tasic turns the tables. The paper is called "Are Regulators Rational?", and it examines the cognitive biases that are likely to produce flawed decision-making on the part of regulators.

Yes, it's tit-for-tat to the attack on markets implicit in behavioral economics, but it's a sound and fair paper that opens new insights onto regulation. This is a good time to do that. Too many take it as an article of faith that the FCC will do better than consumers at protecting consumers' interests.

This is also a good time to remember that the FCC is our national censor. The U.S. government's censorious reaction to l'affaire WikiLeaks should serve as counsel to people who would subject Internet service providers to even greater federal regulation. Regulated ISPs will be more compliant with government speech controls.

It's a point worth emphasizing: Regulated ISPs will be more compliant with government speech controls.

For these reasons, in addition to the ones that have come before, federal regulation of the Internet is a bad idea.