AMA: NY AG Schneiderman on net neutrality and protecting our voice in government

Going back to the early 2000s, the FCC has espoused broadband neutrality principles that prevented discrimination against certain types of traffic. In 2005, the FCC articulated these principles in what became known as the “four freedoms” and used them to stop network providers from discriminating against traffic that competed with their own services, for example: in 2005 the FCC stopped phone company Madison River’s blocking of Vonage VoIP calls that competed with Madison’s call service; and in 2008 the FCC stopped Comcast’s blocking of online video services that competed with its on-demand cable offering.

Comcast sued, and in 2010 a federal appellate court ruled that Title I didn’t authorize the FCC to make Comcast comply with the FCC’s net neutrality policies. So the FCC then issued a new regulation in 2010 that, among other things, banned blocking and other “unreasonable discrimination.” Verizon then sued, and in 2014 the same court ruled that anti-blocking and anti-discrimination rules couldn’t be imposed under Title I. The court suggested, however, that the FCC could issue such rules if it reclassified broadband internet in a way that put them under Title II. In 2015, the FCC issued neutrality rules under Title II, and when ISPs again sued, the court this time upheld the rules and they are currently in effect.

Chairman Pai’s FCC wants to repeal those rules, even though the court held that they were valid in 2016, and even though the courts orders from 2010 and 2014 essentially preclude the FCC from issuing neutrality rules under Title I.

If you want to take a really deep dive into the history of neutrality, which goes back 50 years, I recommend reading this: https://www.wired.com/story/how-the-fccs-net-neutrality-plan...

I have to respectfully disagree with a premise in your second question, that deregulation is what would allow for more market competition. The history clearly shows that when neutrality regulation was in place and enforced, it increased competition, for example: in 2005 it protected VoIP against discrimination by a phone company with a competing service; in 2008 it protected online video against discrimination by a cable company offering cable video on-demand. Moreover, ISPs invested in broadband infrastructure over the years because net neutrality was protecting edge providers, which led to huge innovations like online video, which in turn helped drive ever greater consumer demand for broadband that justified further infrastructure investment.

That is true, but the effect depends on the cost of entering the market. There is a certain point at which the cost of entering the market is high enough that it will not be profitable to compete with incumbents, while remaining low enough that a monopoly will turn a profit.

For example, suppose a railroad must pay $100M/year to maintain tracks in a given region, and the region's customers will pay the railroad $101M/year for service (so the railroad makes $1M/year in profits). Assuming that all railroads have the same costs, it would never make sense for a second railroad to serve that market, because the only way to turn a profit is to capture the whole market. Also note that even if the railroad loses 50% of its customers, it will not see its maintenance costs reduced in proportion -- the railroad must also pay for the trunk line it uses to reach the market at all, as well as for things like the switches used for tracks leading to potential customers.

In fact, contrary to what the article suggests, there is a real example of the natural monopoly phenomenon in the history of railroads. Numerous railroads were built to serve the NYC metro region, but they only competed with each other near major urban centers (NYC, Newark, Philadelphia) and not at all in between. The Pennsylvania Railroad and the New York Central competed for traffic between NYC and Chicago, for example, but they did not actually compete for the many customers in the markets along their main lines, which were actually hundreds of miles apart. For the most part none of the railroads bothered to compete with incumbents further from urban centers, and instead used mergers to expand their businesses into "new" markets rather than overbuilding. The result was that their customers had no choice for first- and last-mile service; the only choice was in which line would carry goods between the first- and last-mile railroads. The railroads were willing to overbuild to gain very large customers, but not for the many smaller customers in less dense regions.

For reference, here is the 1918 map of Pennsylvania Railroad routes:

https://en.wikipedia.org/wiki/File:Pennsylvania_Railroad_sys...

And here is the New York Central:

https://en.wikipedia.org/wiki/File:New_York_Central_Railroad...

(You may notice a bit of a "hole" around northeastern Pennsylvania, around the Southern Tier of New York; that market was served by other regional railroads, but again, competition was limited to urban centers like New York City and Buffalo.)

That is probably the biggest issue I can see with the article: it focuses on service in urban centers or for very large customers (e.g. an aluminum plant in West Virginia), but there are numerous small towns that also need service. I was an undergrad in a small city in New York that had a small airport -- served by just one airline. There were just not enough customers in the entire region for any other airline to bother. Sure, in dense metropolitan regions there is plenty of room for overbuilding and for competition, but half the country lives in the flyover states. Again using the railroad example, one of the arguments for subsidizing Amtrak's Empire Builder route is that it provides service to a number of small towns that have no other options, not even bus companies.

One final point: The choice is not really between monopoly franchises and competing companies overbuilding; another option is to mandate infrastructure sharing to reduce the incumbent advantage. That approach has worked well for ISP service in a number of countries (formerly the United States); it works well for electricity in various places in America. Yet another option is to have the government build the infrastructure, and lease or otherwise allow private enterprises to use it, something which has worked well for roads since antiquity.