FORECASTS & TRENDS E-LETTER
by Gary D. Halbert
June 18, 2019

IN THIS ISSUE:

1. What is Net Neutrality & Why Does It Matter?

2. One Year In: Internet Thrives Without Net Neutrality

3. Here We Are, One Year Later & No Internet Disasters

4. Yet, Incredibly, the Net Neutrality Fight is Far From Over

Overview

As always, I like to write each week about topics that interest me the most. Since most of our lives increasingly revolve around the Internet, I thought I would write about how the World Wide Web has been evolving over the last several years.

As we all know, the Internet is the global system of interconnected computer networks that link electronic devices worldwide. It is a network of networks that consists of private, public, academic, business and government networks of local to global scope – linked by a broad array of electronic, wireless and optical networking technologies.

Specifically, I want to talk about an Internet development known as Network Neutrality or more commonly “Net Neutrality.” My readers probably have heard this term and understand it to some extent. But my impression is that most Americans don’t know what it means. In fact, I had a houseful of Millennials last weekend, and none of them knew exactly what it means.

The most impressive thing about the Internet, in my opinion, is that it has grown to worldwide dominance without any single centralized governance, either technological implementation or policies for access and usage. Each constituent network sets its own policies. Pretty amazing!

That is, until President Obama decided the Internet needed to be regulated in his second term.

President Obama was successful in ramming through his plan for the government to heavily regulate the Internet, a set of policies referred to as Net Neutrality, which were fully implemented by early June of 2017. But a year later, President Trump took executive actions to repeal the Net Neutrality rules almost entirely.

The Democrats and the mainstream media warned that dismantling Net Neutrality would be a disaster. They desperately wanted the government to continue regulating the Internet. Well, it’s now been a year since President Trump repealed it, and no disaster or even a hint of it has occurred. In fact, the Internet has continued to grow and evolve in amazing ways.

But before I get started, I must tell you that Net Neutrality continues to have a broad base of supporters, especially among Democrats and liberals. Let’s jump right in.

What is Net Neutrality & Why Does It Matter?

Net Neutrality is the principle that Internet Service Providers (ISPs) – such as AT&T, Verizon, Comcast, Spectrum/Charter, Frontier and others – must treat all Internet communications equally, and not discriminate or charge differently based on user, content, website, platform, application, type of equipment or method of communication.

With Net Neutrality, ISPs may not intentionally block, slow down or charge money for specific online content. Without Net Neutrality, the advocates say, ISPs may prioritize certain types of traffic, meter others or potentially block traffic from specific services, while charging consumers for various tiers of service. As we’ll see below, that is not happening.

But I’m getting ahead of myself.

Proponents of Net Neutrality – which include computer science experts, consumer advocates, human rights organizations, Internet content providers and the like – claim that Net Neutrality helps to provide freedom of information exchange, promote competition and innovation for Internet services and upholds standardization of Internet data transmission, etc.

Opponents of Net Neutrality (including me) – which include Internet entrepreneurs, ISPs, telecom equipment manufacturers and others – assert that Net Neutrality requirements reduce their incentive to build out the Internet, reduce competition in the marketplace and may raise their operating costs, which they would have to pass along to their users.

And why does this matter? It matters because there is a fundamental difference between those of us who want to see the Internet continue to evolve on its own, as it has phenomenally done, and those who think it should be highly regulated, despite the possible consequences.

One Year In: The Internet Thrives Without Net Neutrality

It’s been a full year since the Federal Communication Commission (FCC) repealed Net Neutrality. And how have the predictions of doom and gloom held up? 

In the relatively short time these Obama-imposed rules were in effect, many came to believe the regulations were the only thing standing between a vibrant Internet and a hellscape of greedy Internet Service Providers blocking access to sites, creating slow lanes and making it difficult for many new entrants to get a foothold.

From every corner of the news media and advocacy world, we heard how repealing these onerous rules “would be the final pillow in (the Internet’s) face” (New York Times), would cause “erosion of the biggest free-speech platform the world has ever known” (ACLU) and would be the “end of the Internet as we know it” (CNN).

One of the Democratic commissioners on the FCC predicted that the Net Neutrality repeal would “green light our nation’s largest broadband providers to engage in anti-consumer practices, including blocking, slowing down traffic and paid prioritization of online applications and services.”

Net Neutrality’s advocates were so fearful of the Internet’s demise that they staged numerous protests, and even issued death threats to Trump’s FCC Chairman, Ajit Pai, shown at left.

Thankfully, Pai and the other non-ideologues on the Commission prevailed. And the rules imposed by Obama, which had been in effect since mid-2017, were overturned. That repeal officially went into effect on June 11, 2018.

Well, Here We Are, One Year Later & No Internet Disasters 

The Internet is still functioning just fine. In fact, it’s better than ever. Last year, average Internet download speeds shot up almost 36%, and upload speeds climbed 22%, according to Internet speed-test company Ookla, in its latest US broadband report.

There are more users than ever, more videos to watch, more content to consume. More commerce is being conducted. Few, if any, sites are being blocked. No one is complaining that their service is being throttled, and more people are gaining access to broadband (high-speed Internet).

Meanwhile, the “5G” era approaches, which will increase speeds — for mobile and fixed broadband — exponentially, while injecting more competition among providers.  Elon Musk’s SpaceX has started launching mini-satellites for his “Starlink Initiative,” which will provide broadband Internet to subscribers wherever they are on the planet. 

It all means more competition among ISPs for consumers. Since the entire justification for government intervention was the (dubious) claim that there’s no competition among Internet Service Providers, these latest positive developments alone should weaken the case for a heavy-handed scheme of government regulations imposed in the name of the consumer.

And as to the warnings about free speech: To the extent that free speech is being impeded on the Internet, it isn’t coming from the Internet Service Providers like Comcast or Cox, but from Big Tech companies like Facebook, Google, YouTube, and Twitter. They, not the ISPs, are the ones restricting access to content they don’t like, removing it altogether or making it unprofitable.

Yet, Incredibly, the Net Neutrality Fight is Far From Over 

Democrats in the House recently passed new legislation to re-regulate the Internet, the “Save the Internet Act,” after which Senate Majority Leader Mitch McConnell (R-KY) declared it “dead on arrival.”

Dozens of state attorneys general, advocacy groups and tech companies are suing the government to overturn the FCC’s repeal of Net Neutrality. 

Republicans have indicated that they might accept some lesser form of Net Neutrality regulations – if Democrats were willing to compromise. 

Actually, Net Neutrality advocates, themselves, will likely prevent any such deal from happening. When Senator Kyrsten Sinema (D-AZ.) said she was willing to make a deal, Fight for the Future – a Net Neutrality advocacy group – put billboards up in Sinema’s home state declaring that “Sinema is Corrupt” because she’s “siding with corporate donors to kill Net Neutrality so you pay more for worse Internet.”

We can only hope that Congress remains gridlocked for the time being. After all, the case for imposing any Net Neutrality rules diminishes day by day as the horror stories about its repeal fail to materialize.

At the end of the day, the Internet is doing just fine without Net Neutrality. In fact, it’s doing better than ever. More people have access to the Internet than ever before. Speeds are faster and will get exponentially faster with the arrival of 5G.

While the debate on Net Neutrality may be over for now, since the Senate refused to adopt the bill that just passed in the House, the fight is probably not going away. One poll I saw from back in March showed high levels of support for bringing Net Neutrality back among likely voters.

Over two-thirds said they feared that Internet content would be blocked or censored and speeds would go down. Of course, that isn’t happening! But many people still remember President Obama’s scare tactics when he was selling the idea back in early 2017. It could well come back again as a campaign issue for the Democrats next year. We’ll see.

I hope this was helpful – feel free to share it with others.

LATE NOTE: The Fed Open Market Committee is meeting today and tomorrow, and investors and futures are expecting a rate cut Wednesday when the meeting adjourns. I believe they will be disappointed as the Fed is likely to leave rates unchanged.

Best regards,

Gary D. Halbert

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