Our society has come to a point where teens and young adults cannot go anywhere without being glued to their phones. That the internet is now mobile makes this trend even worse.
For all the time we spend on the internet, it is surprising just how little thought we put into the driving forces behind it. That is, at least, until Wi-fi gets disconnected, and all hell breaks loose. Firms have noted its ubiquity and are seeking new ways to profit in this ever-expanding field. Most notably, internet service providers (ISP’s) have been working diligently, through legislation rather than innovation, to protect their dominance. The debate over net neutrality, which would enable consumers to get equal access to all sites with identical speed, has been a contentious one, with corporate lobbying on both sides. On Thursday, the FCC approved rules regarding net neutrality, a decision that bears tremendous economic implications.
This diagram shows the crux of the issue of net neutrality. Internet service providers serve as the middleman between the internet and us. They have the ability to slow down or speed up the rate at which we can access the information. What determines how fast it is? Money, of course.
The idea of net neutrality gained traction as ISP’s contemplated charging customers more for the ability to have speedier delivery of content on “fast lanes.” Known as Paid Prioritization, it would be carried out at the expense of other regular customers, whose content would be actively retarded. The business strategy here would be to earn a greater profit from content providers with the means- read: money- to pay more for the ability to provide quicker service than their competitors. In its decision, the FCC reclassified high speed internet as a telecommunications, rather than information, service. It concluded that the internet is a public utility.
Most start-ups fail. Those that succeed slowly establish themselves as small businesses, and sometimes go as far as to become behemoths like Google and Amazon. It is in our best interest to support start-ups because their innovation propels our economy.
Many were relieved by the verdict. One of the main arguments in favor of net neutrality was that it protected the rights of small businesses and entrepreneurs. By charging everyone the same price, barriers to entry-hindrances toward entering a certain market- were effectively limited. Preventing ISP’s from offering preferential service to established content providers leveled the playing field. Otherwise, up and coming businesses would not be able to compete and would soon shut down. The regulatory features of net neutrality serve to protect small, underrepresented firms that are often overlooked in the legal sphere, rather than servicing the needs of well established corporations.
We hear about regulation most often when it comes to banks. A trend depicted on this graph is that as the number of banks decreases, the size of existing banks increase. This negative correlation makes intuitive sense: the more efficient banks remain in the market and become more productive. In an economic sense, this is good. However, regulation is necessary to ensure that competition exists so that prices remain low.
Approving net neutrality is notable not only for its support of small businesses, but also for its focus on a hitherto unregulated resource. Unlike most aspects of American society, the internet has experienced unprecedented freedom from government interference. Indeed, the rapid development has made it difficult for lawmakers to pass laws that would not quickly become obsolete. Once relatively unimpressive, the internet has transfixed and transformed our culture in the past decade, thereby giving way to the potential for corporate exploitation. The FCC’s delineation of the nature of the internet is the first major step in regulating a resource previously governed by pure laissez-faire economics.
With the inclement weather we have had this winter, many have chosen to stay indoors and binge watch shows on Netflix. Having so many people stream and watch at the same time drains the speed of the internet for others.
Looking at net neutrality from a welfare perspective, it seems obvious that discriminating prices for different companies is unfair. From a purely economic lens, the issue is far more complicated. A utilitarian would argue that more prosperous companies should have access to faster internet. They would be more efficient by utilizing it in a way that would maximize productivity. For example, everyone would agree that Netflix gets more views in a day than CunyFirst. ISP’s want to incorporate this information into their pricing strategy in order to maximize their profits by charging bigger firms more.
One of the first things you search for wherever you go. Don’t deny it.
In a macro sense, net neutrality is complicated because it tackles the issue of scarcity of resources. By approving net neutrality, the FCC effectively concluded that the internet was a club good-a type of good that is non-rivalrous and excludable. This means that while one can be prevented from using it, one’s use does not limit another’s simultaneous consumption. Case in point: when you use your friend’s wi-fi. A password protected amenity that he pays for, it is excludable; since you can both use the internet at the same time, it non-rivalrous.
Once you go past the fourth floor of the library at Queens College, there is virtually no internet access. While many complain about this, it is an excellent way to force you to focus!
To call the internet a club good, though, is not exactly accurate. One’s use of it does impede on another’s because the wi-fi speed slows. We see this on Queens College daily: the student wi-fi is slow because so many people access the same server at the same time. (Hint: the guest wi-fi, with fewer users, is substantially faster.) And yet, it does not fit neatly under the category of a private good, which is both excludable and rivalrous. The internet thus rests in a state of flux that makes regulation for efficient, yet fair usage nearly impossible.
Our world in the twenty-first century is being shaped by technology. In particular, the internet has become a driving force in developing our society by facilitating innovation, productivity, and the exchange of ideas-all of which are key ingredients for a thriving, dynamic economy. Unfortunately, with every boon comes a bane: the debate over net neutrality highlights the short and long term effects that we must grapple with as the internet continues to explode. With technology and business intimately intertwined, only time will tell (perhaps on the Apple Watch!) what our internet will look like in the future.
