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The Freakout Over Net Neutrality Makes No Sense

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Regulation: "Net neutrality" has become the Holy Grail of various so-called consumer organizations. But government regulation isn't what consumers need. Competition is. And there would be more of that if the government would get out of the way.

On Thursday, the Federal Communications Commission voted 2-1 to start undoing the massive expansion of the FCC's regulatory control over the internet, enacted two years ago by the Obama administration under the guise of protecting "net neutrality."

From the reaction — or more accurately, the overreaction — from advocacy groups and know-nothing pundits, you'd think they'd just voted to exterminate the internet.

Let's leave aside the fact that the internet thrived for decades without any federal rules mandating how internet providers manage traffic on their networks. The question going forward is what is the best policy for consumers.

A brief history of the FCC makes it clear that letting its regulators loose on the internet is not the correct answer. The FCC has a long and dismal record of thwarting price-lowering competition and innovation.

What about the claim that internet providers will abuse their monopoly power to benefit themselves at the expense of other content providers?

First, as of December 2015, two-thirds of Americans already have a choice of broadband providers, whether it's DSL or fiber or cable, up from 61% the year before, according to the FCC. What's more, internet access prices increased by just 2% from 2009 to 2017, according to the Bureau of Labor Statistics. That's a fraction of the overall inflation rate, and when you account for the increase in speed, internet prices have effectively dropped. This is hardly a sign of a rapacious, monopolistic industry.

Second, Verizon (VZ)and AT&T (T) are busy developing 5G wireless broadband that promises blazing transmission speeds. Earlier this year, Samsung showcased a 5G home router that hit speeds of 4 gigabits per second — that is, 4,000 megabits per second. The fastest speed offered on Verizon's FIOS is 500 Mbps.

That poses a direct competitive threat to cable providers, since providing 5G service won't require digging trenches and running cable or fiber lines to the home. Colby Synesael, a telecom analyst with Cowen & Co., called 5G a "game changer."


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