net neutrality

Why Does AT&T Want Net Neutrality Regulation?

Regulation is often portrayed as the use of government authority to alter market outcomes away from the interests of firms and toward those of consumers and employees.  In turn, the “story” associated with deregulation is the opposite: Corporations and the powerful use their influence to eliminate public sector controls on their conduct at the expense of consumers and employees.

But if the usual narrative is true how do we explain a full-page ad that AT&T recently published in multiple newspapers, including the Washington Post and the New York Times, calling on Congress to pass new legislation to guarantee internet neutrality?  The short answer is that existing companies often favor regulation that reduces competition in ways not well understood by consumers or legislators.   

AT&T, one of the nation’s largest ISPs and a company that recently dedicated significant resources to support the FCC’s recent repeal of Title II net neutrality regulations, seems like an unlikely proponent of net neutrality legislation. But its position on the policy highlights why companies sometimes support regulations that would appear to harm them.

AT&T’s opposition to Title II net neutrality regulations is not based on a general hostility towards all regulations, but instead stems from the specific types of rules that Title II regulations would impose. Title II of the Federal Communications act of 1934 was originally intended to regulate telephone companies, and gave the government the ability to review and accept or reject telephone rates. During the fight for net neutrality regulation over the last ten years, the FCC sought to regulate the internet under other parts of the Communications Act, but courts continually said no, forcing the Commission to regulate under Title II. Because Title II comes with the possibility of price controls like those imposed on telephone companies, AT&T opposed that regulatory system and called for Congressional action to ensure net neutrality without the possibility of price controls.

As I’ve previously argued, net neutrality regulations are an attempt to settle fights between ISPs and content providers, like Netflix or Hulu. Both sides “need each other to satisfy consumers, but they fight each other to capture the larger share of consumers’ payments.” Title II price controls would have disadvantaged ISPs and benefitted content providers. Now that the debate over whether ISPs should be regulated under Title II is, at least temporarily, seemingly in its favor, why is AT&T continuing to call for new legislation?

Why ‘Net Neutrality’ Is a Problem

Yesterday, Federal Communications Commission Chairman Ajit Pai announced his intention to reverse Obama administration “net neutrality” rules governing the internet that were put in place in 2015. Some commentators are criticizing the announcement as a give-away to large telecom companies and an attack on consumers. But the Obama rules create some serious problems for consumers—problems that Pai says he wants to correct.

Under the Obama rules, internet service providers (ISPs) are subject to “rate-of-return” regulations, which the federal government previously applied to AT&T’s long-distance telephone service back when it was a monopoly more than 50 years ago. Ostensibly, rate-of-return regulation gives government officials the power to review and approve or reject ISP rates. In reality it basically guarantees ISPs government-enforced market protection and profitability, in exchange for regulators ensuring that ISPs won’t be too profitable.

As explained in this 2014 post, rate-of-return regulation involves more than just telecom. It is an attempt to settle fights between “producers” and “shippers”—whether those are farms, mines, and factories on one side and railroads and shipping lines on the other, or Netflix and Hulu on one side and ISPs on the other. In all those cases, the producers and shippers need each other to satisfy consumers, but they fight each other to capture the larger share of consumers’ payments. If shippers charge more, then farmers, factories, and Netflix must charge less in order to maintain the same level of sales.

The political resolution of the producer–shipper fights was the Interstate Commerce Act of 1887 and its rate-of-return regulations, which were initially written with railroads in mind. Similar efforts were later extended to trucking, air transportation, energy, and telecom. It took about 100 years for policymakers to accept that those efforts hurt consumers much more than it helped them, forcing on consumers too many bad providers with high prices and poor quality.

FCC to Make Internet Service a Public Utility

Do you want your Internet service provider to operate like the water company or the electric company? Internet access services will be more like these leaden public utilities if the Federal Communications Commission tries one of the more likely workarounds to a D.C. Circuit Court decision today that restricts its authority to regulate.

Obama on Record: Supports Internet Regulation

I’m perplexed by the challenge of referring neutrally to legislation moving through Congress dealing with whether or not the government should regulate Internet service. Work with me as I untangle the Standard Federal Obfuscation™ involved here.

Google under Siege in the Corporate State

“Google is under siege in Washington like never before,” Politico reports.

In an interview with POLITICO, a Google spokesman argued that a cabal of antitrust lawyers, lobbyists and public relations firms is conspiring against the Internet search giant. The mastermind? Google says it’s Microsoft.

Maybe it’s irony, or maybe it’s payback.

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