Net neutrality would end innovation, not preserve it

Tomorrow, the Federal Communications Commission will issue its much-anticipated National Broadband Plan, making universal access to high-speed Internet connections a national priority.

That’s a worthy goal, one that would go far toward rescuing the economy and preserving U.S. competitiveness in high technology innovation.

But it’s also a goal that’s incompatible with the FCC’s other major initiative—the adoption of restrictive rules for how broadband and wireless Internet providers can structure their services.  Adoption of these so-called “net neutrality” rules would make the FCC, as Chairman Julius Genachowski put it, “a smart cop” on the Internet beat, strictly limiting the kinds of innovation in which providers can engage.

Both the FCC and the White House believe that preemptive regulation is essential to the development of new applications like Google, YouTube, and the legion of software “apps” being developed for cell phones.  They want an Internet that empowers companies at the edges of the network to innovate.  Who doesn’t?

But start-ups aren’t the only source of valuable innovation.  Ten years ago, in my best-selling book “Unleashing the Killer App,” I explained how existing businesses, the so-called “brick-and-mortar” companies, were using the Internet to reach new customers and change the rules of mature industries.

Older companies were being severely tested by energetic young entrepreneurs, I wrote, but had the same potential to unleash groundbreaking or “killer” apps. I urged these enterprises to rethink their assets and business relationships, to “cannibalize their own markets” in the interests of unlocking hidden value. 

In the last ten years, I’m happy to report, businesses of all shapes and sizes have embraced digital technology to create exciting new products and services for consumers.  Supported by advertising and other information-harvesting techniques, some of the most useful of these offerings come free or at very low cost.  Digital life is flourishing.

As proposed, the net neutrality rules will cut off the flow of that innovation.   They change the rules of the game, stacking the deck decidedly and needlessly against the brick-and-mortar companies who provide Internet access.  Rather than enshrine a level playing field for the Internet ecosystem, net neutrality would force Internet service providers into a commodity business that will discourage needed investment in new technologies like fiber optics and 4G wireless networks.

With the FCC as the “smart cop” enforcing these rules, innovation across the web will quickly grind to a halt.  Worse, the proposed rules would likely backfire.  Over the last ten years nearly every federal and state effort to regulate Internet businesses has failed.  These include laws aimed at reducing spam and software viruses, protecting technologies that restrict the resale of digital media and efforts to rid the Internet of “indecent” content. 

In every case, the slow pace of lawmaking relative to the speed of technology change has tripped up these sometimes-noble efforts.  Yet these obsolete laws stay on the books, often springing back to life in ways that produce unfortunate and unintended consequences. 

There is a way government can help.  One positive example—one the FCC would do well to heed—is a 1996 federal law that protects anyone who hosts third-party content.  The law grants broad immunity from liability for user content, including websites, blogs, reviews, and ads.  Among others, the immunity law has protected eBay from charges of false advertising by the merchants who use its service.  Without it, Craigslist could never host millions of free classified ads with a tiny staff. 

Indeed, it’s no stretch to say that without the immunity law the social networking revolution of MySpace, Facebook, and Twitter would never have occurred.  Those anxious over our global competitiveness should also note that the immunity law is a key reason all these killer apps were developed in the U.S.  Why?  Few other countries offer that kind of legal breathing space.  (Consider Google’s recent troubles with an Italian court over a troubling user-posted video.)

We need more laws like the immunity statute--laws that check the natural tendency of lawmakers, at the behest of powerful interests, to micromanage valuable and rapidly-evolving Internet businesses into the ground.  What we don’t need are wrenches thrown into the humming machinery.  Unfortunately, the FCC’s proposed net neutrality rules look a lot more like the latter than the former.

If the National Broadband Plan is to achieve its admirable objectives, the Internet must remain open.  But it must also remain open to new ways of doing business, and not just by start-ups.  To keep the killer apps coming, everyone must be free to innovate.

Larry Downes is the author, most recently, of “The Laws of Disruption:  Harnessing The New Forces that Govern Business and Life in the Digital Age.”

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