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Wednesday, December 12, 2007

Internet Freedom--Real vs Imagined
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Bravo for Larry Downes of ZD Net who has a smart new column out today entitled "Save Internet Freedom--from Regulation." Downes is referring to the ominous threat posed to the future of the Internet by the Net neutrality bill that Rep. Edward Markey (D-MA) is likely to introduce shortly. Downes points out that:

The Internet has thrived in large part because it has managed to sidestep a barrage of efforts to regulate it, including laws to ban indecent material, levy sales tax on e-commerce, require Web sites to provide "zoning" tags, and to criminalize spam, file sharing, and spyware. Some of these laws have been overturned by the courts; some died before being passed; and the rest--well, the rest are effectively ignored, thanks to the Internet's remarkable ability (so far) to treat regulation as a network failure and reroute around the problem.

Exactly right. Why then, Downes asks next, "do the same civil-liberties groups that recognize the value of keeping the government out of Internet content want to open a loophole large enough to drive several Mack trucks through?" GREAT question, and one that we've been asking on this site for many years.

I suppose it comes down to the inherent trust many liberals and some in the civil liberties community are willing to place in government to do good things when they intervene in the economy. After all, their intentions are good, so we shouldn't just trust 'em, right? And they same goes for calls to regulate to preserve Internet freedom, right? If Ed Markey and some FCC regulators knock on our doors and tell us they are here to help, then we should just invite them right on in and let them get down to the business of regulating, right?

Wrong, wrong and WRONG. As Downes correctly argues, "the information superhighway to hell is surely paved with good intentions." What proponents of regulation often fail to realize is the lesson that the intellectual giants FA Hayek, Milton Friedman, and Thomas Sowell taught us long ago: the best of intentions cannot protect us against the worst of unintended real-world consequences. For example, Downes points to the dismal results of previous well-intentioned regulatory interventions for industries such as railroads and airlines:

Nearly 100 years ago, shippers in cities between the Mississippi and the West Coast, which were largely served by only one road, found that they were being charged higher rates to subsidize competitive tariffs from cities east of the Mississippi, where shippers had several choices. Like those calling today for Net neutrality, the Intermountain shippers demanded "reasonable and fair" rates of carriage. Congress agreed, but it left the definition and enforcement of these deceptively simple terms to the Interstate Commerce Commission.

So, what was "reasonable"? The ICC struggled for decades to answer that single question, spending 20 years and hundreds of millions of dollars before giving up, unable to agree on how to value the railroad's assets in order to calculate a reasonable rate of return. With the industry consumed by this "simple" effort to make its operations "fair," other forms of transportation emerged and ultimately put the railroads out of their misery.

More recently, the Civil Aviation Board (CAB), which micromanaged U.S. commercial air travel until 1978, worked to ensure "fair" ticket prices for everyone but in practice created a mess of routes, subsidized carriers, and indecipherable rate structures. Since the CAB was dismantled, air travel has not only expanded but, thanks to market forces, is now also cheaper for consumers.

And what about the Sarbanes-Oxley Act, the law passed in the wake of Enron, WorldCom, and other corporate scandals? SOX requires "transparency" in financial statements, a worthwhile goal, but one that, so far, has cost public companies that weren't committing fraud billions of dollars in compliance. No one seriously believes that money has helped investors make sense of a single balance sheet.

The problem with "simple" regulations is that they never are--especially when the industry being regulated, thanks to new technologies, is evolving rapidly.

Again, exactly right, and the regulatory problems we experienced in those sectors would likely be magnified many times over if we tried to apply "non-discrimination" regulation to the Internet, as Bruce Owen makes abundantly clear in his latest essay in Regulation magazine.

The proponents of Net neutrality are trying to sell us "freedom" in the form of regulatory chains on the Internet. We shouldn't buy into their Orwellian doublespeak.

posted by Adam Thierer @ 4:16 PM | Net Neutrality

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