Net Neutrality Has Become A War Between Two Oligopolies; Consumers Are Collateral Damage

In a clear sign that the progressive message is finally moving the Overton window, Farhad Manjoo has written an article on the front page of the NY Times business section that says this, “This column is nominally about network neutrality… But really, this is a story about ballooning corporate power.” It’s been a long time since market concentration in the US was probably even mentioned in a NY Times business section story as a real problem, except when quoting a progressive economist, pundit, or politician in the context of another merger.

Ajit Pai, the new chairman of the FCC, is determined to gut the rules on net neutrality, allowing broadband providers to charge different prices to content providers. The original battle over net neutrality was about making sure that digital innovators would not be “locked out” by the telecom monopolies. This would protect consumers’ ability, say, to connect a Netgear wifi router to the Comcast cable box rather than being forced to use a Comcast product or to have a product that directly competed with the telecom still get access.

But now, as Manjoo points out, net neutrality is largely a battle between the telecom oligopolies and the internet oligopolies, Comcast versus Google for instance. Actual consumers and other digital innovators are merely bystanders, or collateral damage, in this war between monopoly powers. Amazon, Apple, Facebook, Microsoft, and Alphabet control virtually all of our digital technology, the operating systems, the browsers, and the cloud storage. AT&T, Verizon, and Comcast control the digital pipes though which all that information flows. As Manjoo says, “People used to talk about the internet as a wonderland for innovative upstarts, but lately the upstarts keep getting clobbered. Today the internet is gigantic corporations, all the way down.”

But even this view of telecoms versus tech is simplistic as these oligopolies are bleeding onto each others’ space. Manjoo continues, “Telecom companies are becoming internet companies (Verizon now owns AOL and Yahoo), internet companies are dabbling in telecom (Alphabet has a fiber-optic internet service arm), and they’re all becoming film and TV studios”.

In many ways, the battle for net neutrality has already been lost. These monopolies make more money even when their competitors succeed, from increased cloud services to app store income to increased advertising. As an example, 99% of the new ad revenue in the last year has gone to just two companies, Google and Facebook. And when a competitor gets just a little too popular, these giants simply copy the idea and market their own competitive product, sometimes successfully, sometimes not. And when worse comes to worse, they can simply buy the competitor out.

But removing the rules on net neutrality will mean these oligopolies won’t even have to take those steps to quash their competitors. Again from Manjoo, “But Mr. Wu [the originator of the concept of net neutrality] points out that at least the giants now have to do something to respond to rivals. In the absence of neutrality rules, all they might have to do its buy up access to speedy lanes online, thus easily preventing rivals from ever working well on people’s phones.”

Both sides, of course, claim that their position will increase competition. Tech companies claim that keeping the existing net neutrality rules will allow the marketplace of ideas to work. Telecom companies say that that removing the net neutrality rules would allow start-ups to more easily compete with the tech giants because they would need less infrastructure investment and instead could simply buy broadband speed.

The reality, of course, is that, whatever happens with net neutrality, both the telecom and tech oligopolies will still probably win. That’s just the way it is with monopoly power.