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This FCC Rule Will Matter More Than Net Neutrality Will

The decision in favor of municipal broadband networks does more than “open Internet” rules ever could to increase competition in a broken market.
February 26, 2015

Today’s ruling on net neutrality by the U.S. Federal Communications Commission is being described as a historic and crucial milestone, but a separate decision by the regulatory body today is more meaningful because it addresses the overall problem of insufficient competition in broadband markets.

If there were more competition among broadband providers, it seems unlikely that we would need rules specifically guaranteeing an “open Internet,” aka net neutrality. Even now there isn’t really evidence that huge ISPs such as Comcast abuse their power by favoring their traffic over, say, Netflix’s. But the best argument in favor of net neutrality is that because there are so few broadband providers in any given market, ISPs could abuse their position and consumers would be hard-pressed to protest by taking their business elsewhere.

One way the big ISPs show anticonsumer tendencies is by vigorously opposing cities and towns that want to build their own broadband networks as an economic development tool. The companies complain that city-run Internet services, which don’t have to earn a profit, amount to unfair competition. It’s a weak argument, given all the schools, insurance companies, transportation providers, and other private entities that manage to compete with services run by governments. Nonetheless, telecom companies have persuaded 19 state legislatures to block or restrain municipal networks.

Today, however, three of the five FCC commissioners said that Tennessee and North Carolina had improperly prohibited the expansion of community-run broadband networks. The decision, assuming it can stand up to a court challenge, would apply only to those two states, meaning its initial impact won’t be widely felt. But it’s a step toward the development of more broadband competition.

The net neutrality rules that passed today might end up working well, preventing ISPs from abusing their market power. Or the rules might do very little, partly because they have big loopholes or are hard to enforce. They might even have bad unintended consequences.

In contrast, any ruling that increases competition, even by just a little bit, is unequivocally a positive development.

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