NCPA - National Center for Policy Analysis


August 3, 2006

It's tempting to believe that government regulation would make the Internet more consumer-friendly; history and economics suggest otherwise.  The reason is simple: a regulated industry has a far larger stake in regulatory decisions than any other group in society.  As a result, regulated companies spend lavishly on lobbyists and lawyers, and over time, turn the regulatory process to their advantage, says Timothy B. Lee, a policy analyst at the Show-Me Institute.

Economists have dubbed this process "regulatory capture," and they can point to plenty of examples:

  • The airline industry was a cozy cartel before being deregulated in the 1970s.
  • Today, government regulation of cable television is the primary obstacle to competition.

Of course, incumbent broadband providers do have some limited monopoly powers, and there is cause for concern that they might abuse them.  But enforcing such a "pay to play" scheme might be more challenging, says Lee.

  • As every music-downloading student knows, there are myriad ways to evade Internet filtering software.
  • Moreover, an Internet service provider that denies customers access to content risks a serious consumer revolt.
  • Unlike a one-railroad Western town, most broadband customers can choose between cable and DSL, and a growing number have access to wireless options as well.

With several promising new technologies on the drawing board, the market for broadband will only grow more competitive.  Congress should let the marketplace develop rather than constrain it with regulation.  Lawmakers should certainly be mindful of unintended consequences.  The Interstate Commerce Commission's regulations on transportation lingered for decades after their usefulness expired.  Any neutrality regulations passed by Congress this year are likely to have a similarly dismal future.  Choice and competition will do a better job of protecting Internet consumers than government bureaucrats ever have.

Source: Timothy B. Lee, "Entangling the Web," New York Times, August 3, 2006.

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