Are Tech Companies Ignoring the Global Impact of Net Neutrality?

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As telecom companies, Internet companies, the Federal Communications Commission, and Open Internet advocates are all embroiled in the debate over net neutrality, one telecom analyst is saying that the content providers in the Internet Association pushing for tighter regulation of broadband Internet should be careful what they wish for.

Telcom analyst and consultant Scott Cleland published an open letter to the Internet Association — which includes companies such as Google (NASDAQ:GOOG)(NASDAQ:GOOGL), Facebook (NASDAQ:FB), Amazon (NASDAQ:AMZN), and Netflix (NASDAQ:NFLX), among others — saying that if broadband Internet is reclassified as a utility in order for the FCC to regulate it more heavily, it could damage those very companies’ businesses abroad, particularly in Europe.

Cleland cited a report by The Wall Street Journal that said the French government is pushing for content providers like Google to be classified as utilities across Europe. Such a law would force Google to guarantee all of its services, similar to a phone operator. “We don’t want to become a digital colony of global Internet giants,” the Journal quoted the French economy minister as saying.

Cleland goes on to say that should broadband be reclassified as a utility in the U.S., lawmakers in Europe could use such a decision to support a move toward reclassifying large content providers in a similar manner. “Other countries’ politicians and regulators watch the U.S. process closely. They could interpret your policy support for strictest utility regulation of American broadband companies with less than 30 percent market share, as sympathy for European utility and privacy regulation of Internet Association companies which often command much higher market shares,” Cleland wrote.

He went on to say that should such laws go through in Europe, it would result in those Internet firms paying European countries billions of dollars in fees, which could end up being more than it would cost them to pay to Internet service providers in the United States. “In sum, Internet Association members appear to not appreciate that other countries monitor what U.S. companies and the FCC do and often apply it overseas,” Cleland said.

Cleland isn’t the first to argue that increased regulation on American ISPs would be a bad thing. Earlier this month, FCC Chairman Tom Wheeler released a draft of his proposed new net neutrality rules, which would allow for content providers to pay ISPs to transmit their content using faster speeds under “commercially reasonable” terms that would be closely monitored by the commission. The FCC then issued a notice of proposed rule making, asking for input from any and all individuals over the next four months as to how it should proceed.

FCC Commissioner Ajit Pai issued a statement at the same time the notice of proposed rule making was released, saying that seeking Title II status to classify broadband as a utility would be a mistake that would inhibit the Internet’s growth. He cited the fact that the Telecommunications Act of 1996 purposefully left the Internet out so that it could grow without government regulation. “After all, nobody thinks of plain old telephone service or utilities as cutting-edge. But everyone recognizes that the Internet has boundless potential. And that’s because the government didn’t set bounds early on,” Pai said.

Republicans have supported the idea that more regulation would harm the Web. The House Energy and Commerce Committee chairman, Rep. Fred Upton (R-Mich.), and the Communications and Technology Subcommittee chairman, Rep. Greg Walden (R-Ore.), issued a statement last week saying that they were also disappointed in Wheeler’s proposed rules.

“Free from regulation and government meddling, the Internet as we know it has thrived. Sadly, these unnecessary rules the commission has proposed today will have a chilling effect on job creation and innovation without any corresponding consumer benefit. These rules are a solution in search of a problem. Worse still, any attempt to reclassify broadband Internet embarks on a worrisome course for its future,” the representatives said.

Meanwhile, Democrats, consumer advocates, and Wheeler himself believe that net neutrality laws are necessary to keep the Internet a free and open space so that new startups have the chance to grow into groundbreaking companies. Without those rules, they believe the Internet could become solely dominated by wealthy, established companies.

Cleland makes a compelling argument that increased regulation would be detrimental to the content providers themselves. Though his argument doesn’t touch on the fundamental issues regarding the concept of an open Internet, it could encourage the companies in the Internet Association to rethink their heavy lobbying in favor of tougher regulation.

“Internet companies appear to imagine that their status as richest, most profitable, most protected, least regulated, least taxed, and least accountable companies, entitles them to the same treatment overseas. It does not. As the old adage goes, be careful what you ask for. The Internet Association’s members aren’t in Kansas anymore…” Cleland concluded in his letter.

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