Wednesday, August 02, 2006

Why "Net Neutrality" Is a Bad Idea

I am not neutral about net neutrality. I am opposed to it.

Almost everything that one can buy comes in different gradations of quality: automobiles, shoes, bread, haircuts, computers, internet service, and on and on. Those gradations of quality enable each of us to buy goods and services that meet our particular needs, given our income constraints and preferences.

Why should I object if certain producers of web content getter better service (faster delivery of their content) if they pay a fee for that better service? They're paying a fee for a service, just as I'm paying a higher fee for my high-speed DSL service than are many other consumers who can't afford or choose not to pay as much for their internet service as I do. My higher fee enables me to obtain web content faster than those other consumers. Should I be forced to accept a slower speed so that they won't be relegated to "second class" status? What about those consumers who pay even more than I do and, in return, get even faster DSL or cable service? What about those consumers who buy big Lexuses when others can only afford Honda Civics? What about those consumers who buy tailored suits when others can only afford to buy their clothes at Wal-Mart?

You can see the end of it can't you? By the "logic" of net neutrality, everyone would be forced to accept goods and services of the same quality. That quality would be poor because there would be no incentive to produce better goods and services to earn more money in order to buy better goods and services -- because they couldn't be bought. Reminds me of the USSR.

But it's "different" for providers of web content. Or so say the proponents of net neutrality. The providers of web content aren't consumers, they're producers. (Aren't we all?) If they're able to deliver their content faster than other producers, they'll have an "unfair" advantage over those other providers. To which I say balderdash. Here's why:

1. A demand for faster delivery of web content will be met by a supply of greater internet capacity, as supliers of internet capacity upgrade their networks in their competitive efforts to meet the demand for faster delivery. That is, the loss of net neutrality is unlikely to have any effect on other content providers. But there's more to it . . .

2. Faster delivery will command a premium, just as a Lexus commands a premium over a Honda Civic.

3. Content providers will demand faster delivery and pay the premium for it only to the extent that it yields a positive return (i.e., greater profit).

4. Faster delivery will yield a positive return only to the extent that consumers actually respond to the products and services offered by buying sufficiently more of them.

5. Those consumers, therefore, will pay the premium for the faster delivery of web content.

End of discussion.