The Death of the Internet – What To Expect Next?

The Federal Communications Commission appears set this week to approve President Obama’s plan for Net Neutrality – a benign sounding name for the strong handed regulation, taxation, and control of the Internet.  The result of Net Neutrality will be a convoluted and burdened Internet that I like to call ObamaNet.  Indeed, unless stopped by the courts or Congress, Net Neutrality will signal the death of the Internet as we know it today.  Internet Freedom will be lost.  After the death of the Internet, what can we expect from ObamaNet?

1. Increased Costs Due to Direct Regulations

By regulating the Internet, Internet Service Providers (ISPs) will be treated like a 1800’s era railroad monopoly or a 1930’s era phone monopoly.  Think of the Internet as constrained to a Ma Bell utility model, lacking avenues for innovation and growth.  With Title II (of the 1934 Communications Act) designation, broadband ISPs can be regulated.  Rates for both consumers and edge providers (content providers) will be regulated.  Charges and practices will both be regulated.  Costs will likely increase substantially.

2. Increased Costs Due to New Taxes on the Internet

Title II designation for the broadband ISPs means new taxes will be assessed.  Expect a Universal Service Fee of 16.1% to be levied within a year or two.  It will represent an estimated $17 Billion tax increase against consumers.  Other taxes might also be applied.  It also opens up the potential taxing of the Internet by States as well.

3. Increased Costs Due to Business Model Restrictions

The FCC will also have final say in what business models are “just and reasonable.”  Innovative new business models will likely fall by the wayside because a regulatory utility climate fosters stability and stifles creativity and disruptive change, especially change that favors new, entrepreneurial small businesses.  Large companies will be favored at the expense of new small businesses with great new ideas.  Up until now, the Internet has been a platform for new ideas, astounding innovations, new businesses, new business models, new jobs, new apps, new services for consumers, new sales, and new profits.  New business models and new services will fall victim to ObamaNet.  Costs for favored business models will increase.

4. Increased Costs Due to Micro-Management of an Industry

Net Neutrality opens up the door to essentially the complete micro-management of a private sector industry that has been flourishing without in-depth government regulation.  Micro-management means increased regulatory compliance costs, just as we have today with ObamaCare and Medicare.  Skyrocketing and unnecessary costs are the result of micro-management of the private sector by the government.

It has been said that Net Neutrality is a: “solution that won’t work to a problem that doesn’t exist using legal authority we don’t have.” There is no significant Internet problem today.  Why destroy the Internet Freedom that works so well technologically and economically?  Why stifle the Internet and Internet Freedom?  By the way, Congress and the courts are on record against Net Neutrality.  Who gave the FCC legal authority to classify an industry created in the last few decades as coming under the jurisdiction of a 1930’s Great Depression era law?  Isn’t that a big stretch?  If the FCC wants such authority, they can go to Congress and ask for new legislation.

5. Increased Class Action Lawsuits (and Indirectly Increased Costs to Pay for Settlements)

Title II designation will likely embolden both class action lawsuits and individual lawsuits against both Internet Service Providers and Content Providers.  Expect a plethora of lawsuits that challenge technical and business model innovation as well as service models, bundling of services, and/or pricing models.

6. Less Innovation (Technological and Business Model Innovations)

This is to be expected from a tougher regulatory and tax climate.

7. Slower Performance (Speed, Bandwidth) as well as Decreased Functionality, Reliability, and Service

This is to be expected given increased costs and less operational freedom to serve consumers.

For more information

For more information on economic freedom, please read my newest book (2014) Renewing America and Its Heritage of Freedom. It’s available in both print and Kindle editions.

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