National crises often illuminate bad government policy. The COVID-19 outbreak has done so for all sorts of policies, from strict regulations on new medical tests, to restrictive medical licensing, to trade barriers, to limits on freight transport.
But crises also demonstrate good policy, and such is the case for the 2017 Federal Communications Commission decision to do away with “net neutrality” regulation of the internet. Under net neutrality, which had been imposed by the FCC two years earlier, internet service providers were required to give equal treatment to all data traveling across their network, even if some data were especially burdensome. Economists argued that this dampened the financial incentive for ISPs to invest in their networks and contract with third‐party internet firms to provide additional resources. The FCC, under then‐new chairman Ajit Pai, accepted that reasoning and changed course.
The FCC took a lot of heat for that (and Pai’s children were even accosted). The decision took away people’s privacy rights. The telecom industry was the big winner and everyone else was the loser. The internet and innovation itself were being killed. Or so the critics said.
But then the new FCC decision went into effect in 2018 and … nothing bad happened.
Now, two years later, we’re benefiting from that policy change. In today’s Wall Street Journal, Penn law professor and telecom expert Christopher Yoo contrasts the effects of European internet regulation, which is akin to net neutrality, to U.S. regulation:
The U.S. and EU have seen dramatically different investment and utilization. Between 2010 and 2016, American providers invested on average annually 2.35 times as much per household as their European counterparts. This allowed the average U.S. household to consume more than three times as much data as the average European household in 2017, according to Cisco. This is a significant jump over the 44% difference between U.S. and Europe that existed a decade ago. Emphasizing investments in infrastructure allows consumers to realize more of the benefits that the internet can provide.
That investment is paying dividends now that Americans are sheltered‐in‐place because of the COVID-19 pandemic. People are finding ways to socialize over the internet, using such tools as FaceTime and Zoom. They are ordering groceries and other deliveries. They are keeping entertained with e‐books and video streaming services, while artists provide at‐home concerts and other entertainment. And many people are still earning a living and contributing to the economy by telecommuting.
Network investment has allowed the U.S. to enjoy greater usage levels and higher capital spending than Europe over the past decade. This was a strong endorsement of U.S. policy even before the novel coronavirus rearranged patterns of bandwidth consumption around the world. That U.S. producers have responded to the recent surge in demand without having to throttle high‐quality applications provides the most eloquent demonstration of the wisdom of that approach.
Readers of Cato’s policy journal Regulation will recognize Yoo’s name: he has written a couple of articles on net neutrality for us in recent years. Several other authors have done so as well. For a summary of those articles, click here. For other Cato work on net neutrality, click here.