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The Broadband Cartel and America's Entrepreneurs


On my morning subway adventure to work, I read a poster advertisement contending "A better web begins with your website."

That's a flattering delusion. A better Internet begins with broadband capacity and access to it. If nobody can access the website, it's not even a digital tree falling in the forest. Nobody would have created it. If people can access it, there is no predicting which site will launch the next entrepreneurial triumph. That's why entrepreneurs love the Internet.

Related: The Latest FCC Net Neutrality Rules Should Be Opposed

Which brings us to "net neutrality,'' the uninspiring shorthand for a principle that should rally entrepreneurs into a territorial frenzy. Net neutrality, in practical terms, means if you have an idea you can get all the bandwidth you need. What happens after that is on you. The opposite of net neutrality is what we teeter on now. A cartel of America's most hated companies, the ones who may or may not show up at your house to install cable TV on the day you took off work, have used their unlimited budgets for lobbying and litigation to thwart the Federal Communications Commission's regulations requiring net neutrality. If they get what they want, they will determine how much broadband they build and they will allocate it.

When it comes to expanding the choice and quality of goods and services, the fang-and-claw competition of our robust free market is seemingly infallible (or at least brutally self-correcting). Not so in the broadband space. Just 13 providers have more than 80 percent of the market and, as we all know, they mostly split the market as local monopolies. Of those 13, just two, Comcast and Time Warner, who fervently want to merge, have more customers than the rest combined. Comcast CEO Brian Roberts bizarrely insists the merger is "pro competitive.'' What he really means is, since they don't compete anyway, the merger won't reduce competition.

The predictable result of this market distillation is Americans pay more for less. Over time, if we pay more for slow broadband access and our international competitors pay less for faster, they win and we lose. "We'' won't include broadband providers, who will do quite nicely regardless. Paradoxically, our free market needs broadband regulation to remain free.

America has recognized and shrewdly managed transformational technology before. The Internet, wondrous as it is, is not more transformational than was electricity a century ago. Then, as now with Internet access, private companies built some generation and ran wires to where they could sell for a profit but nowhere else. It soon became apparent electricity was not like other goods and services. The cost of generating capacity and distribution systems made competition impractical.

Because we recognized a society with universal, ample electric power is incomparably more desirable than one where electricity is a nice thing, if you can afford it, we made a deal. Private investors who raised the money to build power plants and distribution systems were rewarded with regional monopolies and a guaranteed rate of return. Before long, if you had a great idea, you could rely on all the electricity you needed being available. We eventually did the same thing to bring universal phone service.

Related: What Is Net Neutrality, and How Can It Affect Your Business?

We need to do the same thing now with broadband. Broadband providers have much more in common with the old Ma Bell and electric company than with the entrepreneurs who depend on them. The Federal Communications Commission, having lost a suit brought by Verizon challenging its net neutrality regulation, has the authority to do just that, if it has the courage. Entrepreneurs need to speak up. We need a free and open Internet, with no "fast lines'' affordable only to the biggest players. We need transparency from providers, service standards, steady progress toward universal access and the option to prod providers by building our own municipal and regional networks where they won't. Providers are entitled to a fair rate of return, not control of the economic future of the country.

The FCC is taking public comment on net neutrality. It's a good idea to speak up. If you're too busy to think up something original, just repeat what FCC Chairman Tom Wheeler said: "There is only ONE Internet. It must be fast, robust and open. The speed and quality of the connection the consumer purchases must be unaffected by what content he or she is using. And there has to be a level playing field of opportunity for new ideas. Small companies and startups must be able to effectively reach consumers with innovative products and services and they must be protected against harmful conduct by broadband providers. The prospect of a gatekeeper choosing winners and losers on the Internet is unacceptable.''

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