Net Neutrality, Monopolies, and Innovation: Deciphering Ted Cruz

US Senator Ted Cruz posted a baffling tweet last week:

The media response to this tweet was mostly confusion. The Oatmeal drew a cartoon attempting to explain net neutrality to Cruz in The Onion’s usual bombastic style, and a bunch of other blogs have reacted with either confusion or dismay. The underlying theme of many of these seems to be, “what the hell does that even mean?” Columnists often seem to interpret Cruz’s comments as completely detached from reality, either due to ignorance or cynicism.

Is this true? Or is Cruz making an actual argument, even a bad one, with this tweet? At first glance, it certainly seems to be the former. Obamacare and net neutrality, superficially, have very little in common. Obamacare concerns a service delivery industry essential for the survival and quality of life of millions of people, while net neutrality one concerns an infrastructural system that is essential for a handful of important things and a lot more unimportant things, such as cat videos. Obamacare imposes controls to ensure that everybody has access to health care, while net neutrality imposes controls to make sure that internet providers can’t privilege their own content on the internet. Perhaps the thing that unites them the most is as cartoonist Matt Bors pointed out, that they are both good things.

But for all the silliness of his comment, I don’t think Cruz was just spouting random Republican gibberish. His social media staff are probably too well-paid for that. In order to understand what the comparison actually meant, you need to look at some other Republican talking points to see how it fits into general American right-wing narratives. Republican discussion of Obamacare is a good place to start. Consider this Wall Street Journal article about Obamacare:

“Of the many unintended consequences of the Affordable Care Act, perhaps the least noticed is its threat to innovation. Although most discussions center on the law’s more immediate effects on hiring, insurance rates and access to doctors and care, attention should also be paid to its impact on U.S. research and development and health-care technology. “

I’m not going to address that article in detail, because I don’t know very much about health care innovation. If you do, I’m sure you can pick the article apart. But when you consider that basic understanding about innovation being vulnerable to government interference and apply it to the issue of net neutrality, the parallel between the two in Republican discourse instantly becomes clear. Here’s a statement on net neutrality by Republican Speaker John Boehner:

“It’s disappointing, but not surprising, that the Obama administration continues to disregard the people’s will and push for more mandates on our economy.   An open, vibrant Internet is essential to a growing economy, and net neutrality is a textbook example of the kind of Washington regulations that destroy innovation and entrepreneurship.”

Now we can see what Ted Cruz was actually getting at. To him and other Republicans, Obamacare and net neutrality are similar because they are both liberal-supported government interventions into a business sector that thrives on innovation. What Boehner was saying with his tweet, then, was that just as Obamacare will hurt the health care industry’s ability to innovate, so will net neutrality hurt the telecommunications industry’s ability to innovate.

So then the question becomes: Is this actually true? Will government enforcement of net neutrality harm the telecoms’ ability to innovate? The evidence suggests it’s pretty unlikely.

The problem with Cruz’s view can be summed up in just three words: Monopolies don’t innovate.

This is obvious when you give the matter any thought. Why would a monopoly innovate? Innovation is expensive. It requires research and development labs, uncertain pilot projects, legal wrangling, labour negotiations, and all kinds of difficult and expensive stuff. There is a slight incentive for monopolies to innovate on the supply side to keep their own costs down, of course, but if you want them to work on innovations that could benefit the consumer, then you’ll have to appeal to the goodness of their heart. I’ll leave it up to you whether that’s a viable strategy.

And of course internet service providers, like any other provider of infrastructure, are monopolies. In order for ISPs to compete in any meaningful way, there would have to be duplicate internet infrastructure connected to most houses. Maybe one day that will be possible with wireless internet, but as things currently stand, ISP competition would require a lot more dug-up streets and front lawns in order to lay completely superfluous cables. With the exception of completely new transmission technologies such as Google Fiber, it simply makes no sense to do that.

So if monopolies don’t innovate and ISPs are monopolies, then any first-year philosophy student can deduce that ISPs don’t innovate. And, for the most part, that is true. That’s why we need to have regulations, to make sure that ISPs and other natural monopolies still act in the best interests of their customers, including by innovating. In fact, net neutrality is completely essential for innovation of a different sort. Many of the most exciting innovations we have seen in the past ten years have been introduced by websites. Netflix, for example, has completely changed the way many people watch TV and movies. But, as we have already seen, the Internet Service Providers, who also frequently happen to own cable companies, have been hostile to Netflix; charging it additional fees for access to the network and even throttling its service to get it to pay more. Infrastructureal monopolies are not only reluctant to innovate themselves; they are also both willing and able to block any other innovation that disrupts their business model.

This is all pretty obvious stuff, and I’m not the first person to make these points. But there are a few broader takeaway messages. Firstly: Don’t be blinded by the word “innovation”. The word has lost a lot of meaning lately, and is just as likely to describe new methods of price-gouging or labour exploitation as is is to describe a better mouse trap. Secondly, it’s important to go beyond mere mockery when somebody like Ted Cruz says something like ridiculous like “net neutrality is obamacare for the internet”. There are often hidden dog-whistle messages in statements like that which need to be answered. And finally, this is just further evidence of why we should be working towards a public internet: It would mean the end of lobbyists paying people like Cruz to say things like “Net neutrality is obamacare for the internet”. Maybe net neutrality, like Obamacare, doesn’t go far enough. Maybe in both cases we need a public option.


The Case for a Truly Public Internet

Cable and Railway monopolies

On the left: G. Frederick Keller’s depiction of the railway monopoly in California, 1882. On the right: South Park’s depiction of the cable monopoly, 2013. Comedic style has changed, but the basic complaint about infrastructure monopolies is timeless.

Right now, the American Federal Communications Commission is considering new rules that would essentially destroy net neutrality by allowing Internet Service Providers to give preference to the data from companies that pay a premium rate. In practice, this means that that companies like Comcast and Time Warner (who, incidentally, are about to have a merger) would be able to make the internet look a little bit more like a cable TV network, where whoever has the deepest pockets gets the greatest access to an audience. Big corporate websites will pay for the fast-lane, meaning that their websites will load almost instantly, at the expense of smaller startups, nonprofits, and personal websites, which would have to be content with whatever bandwidth is left over. Companies like Netflix, which competes with the ISPs’ cable TV services, could also suffer. Netflix, in fact, already has.

This touches at least three important political issues that I can think of. Firstly, business and innovation: The erosion of net neutrality will reduce the revolutionary potential of the internet by allowing entrenched interests to curb the threat it poses. Second, free speech: Most political speech today happens via the internet, and this could take a big hit if corporate interests start to limit bandwidth to parties who are critical of them. Third, social justice. A huge amount of interpersonal communication today happens via services like facebook, twitter and instagram, and if these suddenly see their traffic curtailed, or are forced to charge fees for a premium, faster service, then it will hurt the ability of marginalized classes to make their voices heard.

We have seen all this before, and not just in debates over the internet. The current rage against the monopolistic ISPs in the United States is virtually identical to the rage that was directed against utilities providing gas, electricity and railway travel as early as the nineteenth century. Before that, people raged against private turnpike operators. This kind of rage actually played a big role in the switch to a car-dominated transport system. The railways were seen as monopolistic, and so they were saddled with restrictive regulations that made it hard for them to compete with motor vehicles, which were far more flexible.

This problem seems to crop up again and again with any private industry that provides any kind of infrastructure. When somebody invests money to connect cable, phone lines, electricity, or railways to an area, they immediately secure a massive advantage in serving that area. If a competitor tries to come in and build their own infrastructure (which is usually not a very profitable business decision), the result will be a messy tangle of wires, pipes or tracks, and a massive waste of resources and space. So through business deals, regulations, or simple economic rationale, people run infrastructures like the internet tend to become the sole provider to a given area. This, of course, makes them a monopoly and makes it very tempting to engage in profiteering. This, as South Park has ably demonstrated, is exactly what has happened in the cable industry:

To solve this, governments often regulate these industries. But regulation has its pitfalls. It can be too stringent, in which case the old infrastructure is hobbled when a new competitor comes along. Or lobbying can make it too lax, so that profiteering happens anyway. The internet is already regulated, such as by the FCC in the United States, but the constant attacks on net neutrality seem to suggest that this is not a good long-term option. This problem isn’t limited to the United States, either. If net neutrality falls in the USA, then expect the internet companies to try and lobby for similar changes in other countries.

The recent development of Google Fiber suggests an alternative solution: Competition against entrenched commercial interests through the development of new technology. People like Google Fiber because it is breaking up the ISP monopoly. But this only kicks the problem down the road. Can you assume that Google won’t adopt Comcast’s practices once they dominate the internet service market? No, you probably can’t.

Others have suggested taking the infrastructure into their own hands, through what has been called the DarkNetPlan, and maybe in Google’s Project Loon, depending on how you interpret it. But this is likely to be far less efficient than a dedicated infrastructure built by a centralized provider, and at this moment the technology is very uncertain. It’s an interesting idea to work towards, for sure, but we shouldn’t count on it.

So maybe we need to look back at the solutions that have already been used in many places to avoid the monopolies of the railways and the electricity companies. What if we saw the internet not as a private for-profit business like cable TV, but instead more like roads: a public resource essential for society to function effectively in the twenty-first century? In today’s connected society, the internet is probably at least as important as roads. It has become crucial for everything from business to education to health. So why, then, should we be content to make exploitative private companies responsible for the internet? An alternative would be to make the internet a truly public service, run by a government corporation responsible not to its shareholders but to the electorate. Such a company could still break even or even turn a profit, but would have far less temptation to gouge the public or mount attacks on net neutrality. This would ensure that our connectivity is secure, and that it can be taken advantage of by everybody. At the very least, people in very remote areas, where internet currently costs a fortune, would probably appreciate the pooling of resources.

This plan is not without its problems. A public corporation might be more vulnerable to spying by groups like the NSA, for example, although the current corporate internet seems to offer little help on that front.  And even the utopian project of a ground-up, distributed internet could probably be hacked in one way or another So do we really have very much to lose on this front? Another problem lies in the ability of a public internet company to take advantage of the latest in technology such as Google Fiber. But such a company would be responsible to politicians who are ultimately responsible to the electorate, the rolling out of high-speed internet nationwide could be a very popular campaign promise.

Public utilities are not a perfect solution, but they do provide probably the best solution to providing socially just infrastructure that we have discovered yet. If infrastructure companies are beholden first and foremost to their shareholders, as ISPs currently are, then the outcome will always be monopolism and abuse. So we need to find ways to make them accountable primarily to their users and to wider society. This means that perhaps they should be more than a common carrier. Maybe they should simply be a public good.