Safeguarding Access to Internet Content: Government or Market?

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What principles and public policies should govern communicationsnetworks and services in the 21st century? A number of academics,industry analysts, and corporate leaders suggest "nondiscriminatoryopen access" should be the guiding theme for the Information Age.That is, collective decisionmaking should trump the rights ofnetwork operators so that policymakers can compel them to allowcompetitors or consumers to utilize private networks for a varietyof purposes. A better path is available, however-one based on thetime-tested principles of property rights, voluntary contracts, anda healthy respect for the evolutionary nature of the freemarket.

The esoteric debate over open access regulation is quicklybecoming the most important controversy within modern regulatorylaw. The latest example features a catfight between majortechnology companies over access to Internet content accessedthrough the cable or phone lines. A new group called the Coalitionof Broadband Users and Innovators-which counts among its membersAmazon.com, Apple, Disney, E-Bay, Microsoft, and Yahoo!-haspetitioned the Federal Communications Commission to adopt rules toensure that broadband operators will not use their control ofbroadband networks to disrupt consumer access to websites or otherusers. Despite zero evidence that such blocking is taking placetoday, CBUI members claim the FCC must adopt "safeguards" to ensue"that consumer access to Internet content is full and unfettered"in the future.

Who Decides? Before delving into this latestskirmish, let's step back a moment and think about the big picture.Put simply, battles over open access are really a debate about whowill call the shots in the Information Age-the owners ofhigh-technology businesses and networks, or a hodge-podge offederal, state, and international regulators who supposedly havethe "public interest" in mind when they take control of privateproperty for alternative purposes. (Hence, the "infrastructuresocialism" we speak of in our new book What's Yours Is Mine: Open Access and the Rise of InfrastructureSocialism). Critics will protest that label for theirproposals, but what else are we to call the sacrifice of privateproperty for the public good? If the owners of current and futurenetworks cannot determine how their systems are used, and even whohas access to them, they have lost their most basic right withinour capitalist system.

Each year tens of millions of Americans purchase or construct anew home. They sacrifice much for that pleasure and would find itunthinkable if someone were to knock on their door the day afterthey moved in and inform them that heretofore everyone else in theneighborhood would be awarded the "right" of "nondiscriminatoryaccess" to their house. Even if it was just your garage or a patchof your back yard, you'd be outraged. But this sort of thing ishappening with increasing regularity in the business world.Seemingly every network-related industry or technology-electricity,phone and cable companies, and even software like AOL's InstantMessenger service, Microsoft's Windows operating system, and theGoogle search engine-has at some point been the target of openaccess supporters. The faith in open access is based on a flawedassumption, however: that such access represents a limited,competition-enhancing regulatory response to a perceived marketfailure. In reality, access regulation invites a significantexpansion of government planning in markets. It is forced sharing,and ultimately, won't be a temporary measure. Forced accesspolicies require a burdensome regime of price and quality controlsand attendant regulation, and ushers in litigation. Rather thancreate competitive market rivalry, open access discourages genuinefacilities-based competition, investment, and innovation.

In the latest battle over open access to Internet content, CBUImembers claim that cable and telco companies are forging a"broadband duopoly" that will "define the Internet for some time,and [allow] network operators to infringe or encumber therelationships among their customers or between their customers anddestinations on the Internet." Apparently, we are being asked tobelieve that the leaders of cable and telco firms are schemingvillains-like Montgomery Burns on "The Simpsons," wringing hishands while concocting his next sinister plot to make the lives ofthe town folk miserable. Broadband network operators are supposedlyhell-bent on denying consumers access to all sorts of Internetcontent. But does that make any sense whatsoever? Why in the worldwould network operators seek to limit choices in such a way? Andwhere are the examples? Regardless, the forced access crowd willretort, "Well, it could happen, so we better stop itbefore it does!" And that's usually about as much legal reasoningas is needed to get the wheels of Big Government spinning.Regulators will whip up a preemptive, prophylactic measure to makesure we are all safe from the greedy capitalists who, incidentally,provided us that high-speed home Internet connection that wasn'tthere just a few years ago.

Property Rights Versus Parasitism. Typically,it is the self-anointed "consumer advocates" who clamor for suchregulatory activism, making it easy to classify calls for forcedaccess as just another form of wealth redistribution. But the CBUIproposal is interesting in that the group's membership includes animpressive list of innovative technology companies, some of whichhave themselves been the subject of forced access proposals. Don'tthose firms realize that this strategy could backfire on them?

Sadly, this episode demonstrates that the greatest enemies ofcapitalism are sometimes the capitalists themselves. Instead ofsupporting the right of rivals to innovate and use their propertyas they wish in all instances-not just when theythemselves are the target-technology firms today are engaged in abattle to employ regulators and the coercive apparatus of theregulatory system to hobble competitors. What CBUI members reallyfear is not that broadband operators might start blocking access tocertain websites outright-a highly unlikely proposition-but,rather, that they might start employing differential pricingschemes for certain bandwidth-intensive sites or forms of content.In this sense, "discrimination" can be a good thing since networkoperators would be pricing according to demand and allocatingaccess to their broadband pipes the same way cable operators pricetheir video programming offerings. As any Econ 101 textbook makesclear, such price discrimination is used everyday in themarketplace in an attempt to match supply and demand and achieveallocational efficiency. But CBUI members probably don't like theidea that their bandwidth-intensive offerings could be pushed intoa "premium tier" and priced at a different rate than those of othersites. So before such price experimentation can develop, CBUI hopesto kneecap network operators with new FCC forced accessmandates.

A New Defining Principle. The collectivistforced access mentality should be rejected in favor of a newprinciple: Competition in the creation of networks is as importantas competition in the goods and services that get sold over new orexisting networks. Property rights in "long and thin" assets likenetworks must be respected, just as we recognize property rights in"short and fat" assets like houses, cars, or television sets. A newcoalition advancing that vision would be a welcome sight indeed-onethat could carry the true mantle of consumer advocate.