By Seth Richardson
Imagine this: The Food and Drug administration issues new regulations that will supposedly protect citizens from the economic disaster of having only a McDonald’s hamburger stand in their community. These regulations require that in order to provide “fast-food neutrality” all McDonald’s chain stores are required by law to vend hamburgers delivered to it’s stores by Burger King.
Moreover, the regulations require that McDonald’s sell the Burger King burgers at the price that Burger King sets, not at the same price McDonald’s charges for their product.
Burger King can now close down all it’s stores and simply ship pre-made burgers to McDonald’s outlets. This will save Burger King billions in expenses for things like real estate, buildings, employees, et cetera. Instead, they can assemble burgers on a production line in Mexico or China and ship them in bulk in a fleet of trucks, which are way cheaper than building brick-and-mortar stores all over the country.
So, Burger King can then set the price for their burgers far below the price McDonald’s can sell them for, and McDonald’s will be forced to vend the burgers for Burger King.
Does anyone fail to understand the natural, though unintended consequences of burdening McDonald’s with vending Burger King products that Burger King can supply at a fraction of the cost because it need not create the parallel infrastructure of Burger King stores full of employees?
For those that might not get it, the result is that McDonald’s will soon go out of business because it cannot compete with a rival that not only gets to use McDonald’s pre-existing infrastructure investment to vend its product, but that does not have to build its own infrastructure in order to access consumers., and can sell it’s products at a much lower price. Pretty quickly, nobody has ANY hamburgers.
This fiction is exactly what “net neutrality” regulations promulgated by the FCC do to companies like Comcast. The regulations will require Comcast to accept and deliver content from competitors, like Netflix, at a much lower price than Comcast can charge for the very same movie.
Netflix sells movies. Comcast sells movies. That’s fair competition, or so people think. The problem is that Comcast has invested billions of dollars building the infrastructure to deliver it’s products to its customers. Real infrastructure consisting of millions of miles of cables, wires, optical fiber, computers, routers and all manner of durable installations that allow Comcast to deliver digital data to its subscribers. In order to make a profit, it has to price its products sufficiently high to recover the cost of that investment in infrastructure.
Netflix, on the other hand, hasn’t spent a dime on such “final mile” infrastructure, much less interstate and intercontinental data backbone infrastructure. Netflix just buys the right to market movies and owns a bunch of servers and storage connected to the Internet. Netflix doesn’t have the costs associated with building all that network infrastructure to pay for, so it can charge far less for its products than Comcast.
Those who support “net neutrality” (through the brute force expedient of FCC regulations) are demanding that Comcast (McDonald’s) deliver Netflix’s (Burger King’s) products, even though doing so damages Comcast’s ability to pay for the infrastructure it developed and installed, much less make a profit.
That’s not only grossly unfair, it’s flatly unconstitutional and bad business practice. Comcast has a right to restrict who uses their infrastructure to deliver competing products. If Netflix wants to deliver movies to its customers, then it should either build its own network infrastructure, at its own expense, or it should pay Comcast what Comcast asks for the use of its infrastructure.
By the same token, Comcast should be under no obligation to deliver a directly competing product merely because it has a dominant marketing position in any particular area, any more than McDonald’s should be required to vend Burger King products merely because Burger King has decided not to open a local outlet in a particular region.
What the FCC has done is to seize the private property rights of Comcast and other internet service providers for the ostensible benefit of consumers, which is a violation of the Fourth Amendment proscription on taking private property for public use without just compensation.
This “net neutrality” regulation must, and likely will be tossed out… again… by the Supreme Court. And it should be. Because if it’s not, Comcast and other similar companies will go out of business, and everyone’s Internet access will be degraded or eliminated.
Remember, Comcast has invested billions in creating “final mile” infrastructure. If they go out of business, tens of millions of people will instantly lose connectivity to the Internet entirely, because Comcast is under no obligation to let anyone else use their infrastructure, or even keep it maintained.
So, “net neutrality” supporters, be careful what you wish for, and give some serious consideration to the unintended consequences of your position.
© 2010 Altnews