Net neutrality is not Marxism

Last Updated on August 31, 2014 by Dave Farquhar

There is a fear campaign going on, suggesting that net neutrality is Marxism, or a plot for the government to take over the Internet.

That’s name calling. There’s actually something very different going on.

I’m not going to resort to name calling, but the fight for network neutrality basically centers on the ability to charge for transmitting data twice. Companies like AT&T have been talking about this for years, but never got around to trying to charge Ebay, Amazon, and Google for delivering their data to their customers (while still charging those customers $50 a month for Internet access of course), though they first floated the idea when Ed Whitacre was CEO.

I suspect they never did it because they feared consumer backlash. And there was some talk for a while that if they did, the three companies might band together and create their own non-throttled ISP.

The drive against net neutrality isn’t about Ebay and Amazon and Google so much anymore. Instead, they’ve turned against Netflix. Two things are different about Netflix. Netflix does chew up a lot more data, but more importantly, Netflix challenges the business model of cable television. Indeed, as cable television has grown more costly, increasing numbers of people have cancelled their cable subscriptions and relied on Netflix as a substitute because it’s relatively cheap and lets people watch anything in Netflix’s library whenever they want.

So it should come as no surprise that all of the major Internet providers have demanded payments from Netflix. Netflix made those payments, and then, predictably, they raised prices. Don’t be surprised if they come back for more next year, and then the year after that.

The battle against net neutrality isn’t pro-capitalism. It’s anti-capitalism because it interferes with markets and it stifles competition and innovation. Consumers don’t want $100 cable TV plans with 400 channels; they want to be able to pick what they watch. Netflix doesn’t give them everything they want, but it comes closer and it costs $9 a month. Other companies, including Google and Amazon, and professional sports leagues like Major League Baseball have tried to come in and close the gap. Don’t be surprised if the Internet providers come after all of the other video providers next. To some extent it’s about the money, but to an even greater extent it’s about protecting a business model that’s pricing itself out of the market and, to a degree, is going obsolete.

I hate to resort to a tired analogy, but this is a case of buggy-whip makers petitioning the government to stop Ford and General Motors.

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