As the world of telecommunications continues to grow, the need for regulation on these relatively new technologies has become apparent. The forefront of these conversations and debates usually seems to be the protection of the right to unfettered access of the internet. Large internet service providers have historically lobbied for the right to control what content they pass along and at what speeds they do so. The opposition to this argument, which is generally supported by the public and all companies who host themselves online, states that complete access to all of the legally hosted websites in the world is a right, rather than something that needs to be purchased in a competitive market. In the last few years this argument has ended in favor of the unadjusted internet being made available to all as can be seen in the ruling made by the Federal Communications Commision (FCC) on February 26th, 2015 when internet service providers were reclassified from a Title I Information Service to a Title II Common Carrier (Berkman). This new reallocation prohibited by law internet service providers from being able to “make any unjust or unreasonable discrimination in charges, practices, classifications, regulations, facilities, or services” (Communications Act of 1934, 36). This was a large change compared the original ruling in 2002 which would “Ensure that broadband services exist in a minimal regulatory environment that promotes investment and innovation.” (FCC). These two key points of investment and innovation are the backbone of economic growth in the modern marketplace. Although in most Western countries it is widely accepted that net neutrality is the best policy for public welfare, by looking into the rapidly expanding school of thought known as Austrian Economics it can be seen that the loosening of restrictions set on internet service providers would create an economic surge that outweighs the public benefit of a completely open internet.

This school of economics was first developed in Vienna in the Austrian Empire. In 1871 Carl Menger published his book titled Principles of Economics. This piece is generally accepted as the origination of Austrian Economics due to its unique focus on the idea of marginal utility, which is essentially the concept that consuming a product naturally feels good to all humans. This innate homosapien infatuation with consumption is the centerpiece of this school of thought. The beauty of this school of thought is the simplicity of it. Every economic decision, whether it be relevant to an international marketplace or an interaction between two individuals, can be drawn to a personal valuation of products. It seems almost commonsensical, but many mid to late 20th century economists have over complicated things by creating models that revolve around mathematical and statistical analysis. The modern school of Austrian Economics strays away from these models and chooses to focus on the philosophical and methodological reasoning behind human action and consumption (Neck 218-220). 

One of the most prominent promoters of this praxeological view on economics was a Ukrainian economist named Ludwig Von Mises. He spent most of his time writing books and thesis that argued against the legitimacy of fascist, socialist, and communistic styles of government due to the fact that he was writing most of his work in the span of 1920-1950. Before the flare of socialist and fascist governments forming across in Europe, in his earliest work, Human Action, he writes about why his peers went off the trail of treating economics as a philosophical science and changed without good reason to an math heavy science. He explains that massive advancements in the hard sciences such as physics and chemistry around this time made economists feel like their science was being underappreciated. In the rather extensive prologue he explains that the natural connection of calculus and physics is not something that is simply not there in economics. According to Mises extensive and complicated regression and prediction models are pointless and a waste of time that could be spent into the research of praxeology (34-38). He was an absolute extremist when it came to avoiding the use of hard math in his work, which even some supporters of the school have argued against, but his sentiment of keeping economics a study of human behavior is echoed by almost every supporter of the Austrian train of thinking. 

Most supporters of Modern Austrian Economics use this intense study of praxeology to argue against any sort of socialism that can be found in government such as tight regulation of non-monopoly companies. Internet service in the United States and anywhere that internet service is not directly provided by the government is considered an oligopolic market, which is a marketplace where there is a small number of large firms that provide a product or service to a massive marketplace. Relatively quick download and upload speeds are not offered by a great number of internet service providers, and most regions in the country have even more limited options when it comes purchasing good broadband speeds. If a consumer really needs fantastic internet speeds they are probably going to be limited to one or maybe two providers from which to choose. This can be seen in the clustered  bar chart pictured below that lists the service speeds available by percent of the population. 

As seen above as of 2013 only 1% of the United States population has at least three options in their provider if they need 100 Mbps in download speed. Even at the speed of 10 Mbps only 28% of customers have ample options for internet service (considering three options ample is generous). These numbers are fairly generous as well because they only represent download speeds. Most major service providers who sell their bandwidth to residential customers (customers using internet casually at their homes) are notorious for advertising high download rates and providing significantly lower upload speeds, which can be just as important as download speeds depending on what is being done on the internet (My house in Pennsylvania averages 75 mbps download and and upload speed of around 30 mbps according to ookla speed test). If someone were to be interested in having an HD video chat with a family member overseas they would need a minimum upload and download speed off about 4.5 mbps (Polycom). Assuming the average cut of download to upload speed is steady around ⅖ that would put this consumer into the 10 mbps section on the chart above, again leaving this customer a 28% chance of having more than two choices in internet provider. The fact that 30% of Americans either could not get internet fast enough or would only have one choice of provider for a simple HD video chat is a very easy to see example that there is not enough competition in the internet service market. 

The way to create more competition in the high speed internet market is to back down on regulations. The Title II ruling by the FCC is one giant redundancy that is hurting the general public by turning the providing of internet service into an extractive market, which is a market with a high cost to enter and strict regulations, discouraging new companies from joining and creating a stronger competition. Obviously a more competitive market would drive prices down and force these powerhouse companies to provide better service. Whether it be higher speeds, quicker customer service, lower prices, or better network reliability, the entry of new companies to the market can practically guarantee satisfied customers. In his study of praxeology, Mises suggests that in a Capitalistic society a satisfied customers can only be satisfied for so long. Due to Menger’s theory of marginal utility that was discussed earlier, the satisfied customer will only be content while he or she consumes their new product for a short time. After his or her natural urge to consume is satiated s/he’ll just want more. Mises expresses this concept with a simple quote about innovation and consumption under capitalism in his book The Anti Capitalistic Mentality;

“Under capitalism the common man enjoys amenities which in ages gone by were unknown and therefore inaccessible even to the richest people. But, of course, these motorcars, television sets and refrigerators do not make a man happy. In the instant in which he acquires them, he may feel happier than he did before. But as soon as some of his wishes are satisfied, new wishes spring up. Such is human nature.”

 This begins a feedback loop of customers demanding more and spending more, giving the companies a chance to expand and invest. In this case it would result in a better internet experience followed by companies laying fiber lines across the country, which increases capital for the company and lets them start to reach new customers, while keeping the companies at a long run equilibrium of $0 profit. 

Oligopolic markets result in companies gouging prices and having no need to actually satisfy their customers. In response politicians decide to step in with the exact opposite of an effective answer. Politicians have historically decided to throw more and more restrictive policies at everything that isn’t working, grinding the economic development of an industry to a halt. Under Title II regulations service providers are left almost no room to operate without being brought to court. Any increase in price can have the company spending tens of millions of dollars on legal fees to save themselves from the absurdly vague fines describes in Title II sec. 202 section C where the penalty for “mak[ing] any unjust or unreasonable discrimination in charges, practices, classifications, regulations, facilities, or services” results in “the sum of $6,000 for each such offense and $300 for each and every day of the continuance of such offense.” (Communications act of 1964). If the most used internet service provider in the United States, Comcast, were to be decided to have been breaking these terribly vague rules they would be fined over $130 Billion if they were to be fined $6000 for each of their 22.4 million internet service subscribers (New York Post). The remote possibility of being fined $6000 per customer while each customer is probably bringing in a maximum of $1000 revenue a year is practically the definition of a preventative risk. The overhead of starting an internet service company is already extremely high, but if the web was redefined back to a Title I information service by the FCC the lucrative nature of the business and the relatively low cost to deliver the service after the initial costs are cleared would easily push more suppliers into the market. 

Often times when people talk about net neutrality being a necessity for the United States they cite the fact that the open internet protects entrepreneurs. People always scream and shout that closing the open internet would end entrepreneurial innovation and success stories of companies that grew on the internet would never bepossible again. The idea private internet service providers would stop streaming certain websites because they rival in business or to save money on streaming costs is ridiculous because the buyers of the market can demand whatever they want as long as the market is not too hard to join. If in 2007 when Netflix first started to stream movies, the FCC was dissolved and Verizon were to simply stop streaming Netflix people would change to Comcast due to our marginal utility. People need to consume what they are used to consuming. No one would deal with a deterioration of their quality of life rather than simply change their service provider. People respond to that by saying something that involves the collusion of all the large internet service providers. The rebuttal to that is simple, once the regulations are lifted, joining the market will be easy enough that some savvy business man would recognize the massive opportunity and create a new providing service. It’s actually that simple. Beyond that, the Federal Trade Commision would recognize all the major companies were blocking the same companies and they would all get brought in for collusion in an Oligopolic market, creating an effective monopoly. The companies would all be fined and it would be very possible for executives in the company to be sent to jail. There’s no way to discreetly block websites as a service provider. It is very easy to make a program to tell you when a website is getting slowed down or blocked. In this case the open market would preserve the open internet. 

Another common issue brought up when the loosening of FCC restrictions is that internet service providers would simply choose to stop streaming high data websites because it is expensive for them to use all the data. In actuality it is extremely cheap to send data across the network once it is laid. The real cost of running a large internet service provider is all in the constant speed upgrades to the network and to maintain the network that’s been laid. The real cost of sending a GB of Data is less than one cent. Absolutely negligible for companies that bring in revenue in the hundreds of millions of dollars. Stopping the streaming of a website because it uses a large amount of bandwidth would be a terrible decision. If it cost the company even a fraction of one percent of their customers they would be losing money by halting the content flow. 

The expansion of a capitalistic economy relies on constant investment and innovation. When a regulatory body puts unneeded restrictions on a market, it will inevitably smother any growth that has been spurred by an original technological breakthrough. In the early 2000s the United States economy boomed behind the new found accessibility to the internet. This innovation prompted investment which in turn created massive leaps forward in the technology behind the deliverance of bandwidth. The mass availability of relatively good internet speeds is solely due to the loose regulation placed by the FCC in the infancy of the technology. This mass availability is clearly one of the largest increases in public welfare since the industrial revolution. To many supporters of the free market, these new regulations feel like an intentional stifling of an industry that could bring the United States back to the economic powerhouse it was in the early 20th century. There are very few aspects of the economy that the United States can still dominate, but innovation in consumption technologies is the one place that American minds are dominating the market. If Washington wants to suck up all of the profitability and decrease the size of the market, they are simply pulling the ability for these companies to gain investment. If investments dry, so does innovation, and if innovation grinds to a halt there is nothing that can be done with its crumbling economy. Loosening regulations on the companies that create these new technologies is the only way to fan the smoldering embers of the US economy back to a raging fire.
