Keynes at Home, Smith Online: Why Internet is Not Telephony and Congress Should Let it Remain Free | Commentary

Posted November 24, 2014 at 4:31pm

All governments tend to subscribe to the principle of “Keynes at home, Smith abroad” — or, advocate market deregulation abroad but retain government powers at home. In the days of electronic surveillance and privacy concerns, telecom authorities around the world are applying this principle to the Internet. But the ideas put forward by President Barack Obama on broadband regulation could backfire with unintended consequences for the global openness of the Internet. The new Republican-controlled Congress should maintain the bipartisan approach of light regulation that made the Internet so successful; otherwise, the U.S. leverage on Internet governance could be lost.

Internet governance should be a straightforward affair — as the Internet is a network of interconnected networks, no single country is actually in charge; no government could control or shut down the entire Internet. But this has not stopped several countries to tighten the control within their borders — in China, telecom operators are strictly liability for what is made available online for their customers, and web site owners must apply for a license that incites self-censorship or shutdown; in the wake of the Ukrainian conflict, Russia enacted a law giving its telecom regulator the power to block any site that threatens “public order.”

In contrast, the U.S. and Europe kept a lightly regulated approach. This stance is changing: Some EU countries advocate the creation of a “European cloud” so citizen data never physically leave the EU, and to break the dominance of U.S. tech firms. In the U.S., Democrats and Republicans alike have been cautious of applying 1930s regulations to the Internet. That is until last week, when President Obama asked the Federal Communications Commission to regulate much of the Internet under the “Title II authority” — an arcane law that put extraordinary liabilities on phone companies, public transport, and freighters. This change gives the agency far-reaching authority originally styled for old telephone monopolies.

Some deem such government interference as necessary. However these actions coincide with renewed efforts by authoritarian countries to bring Internet governance under the umbrella of the International Telecommunications Union, a UN agency originally created to ensure transnational telegrams and phone calls, to extend its authority to global Internet traffic. Russia, China and Saudi Arabia aim to legitimize authoritarian control over the Internet, and get rid of the multi-stakeholder model of governance that gives civil society and business equal say in how the internet is run.

Here is where the Keynes-Smith analogy becomes relevant: All governments — dictatorships and democracies alike — justify internet regulation as a necessity for common good, although Congress and Russian Duma have different definition of what that is. The troubling fact is that the modus operandi for authoritarian internet and Title II authority is practically the same: governments extending the liabilities of Internet operators and detailing what they must do. Authoritarians will not be late in pointing out the double standard to legitimize their control over the Internet.

Government interference on the Internet is an ill-fitting concept of the past, and Congress has now an obligation to act as a moderating force. In cases of market abuse, antitrust rules should apply online as well as offline; net neutrality can be achieved through legislation without ceding to government control — and Congress, not unelected regulators, has that jurisdiction. Title II is a slippery slope — and just one step from putting search engines and apps coming under government control.

In Europe, where government price controls indirectly support the former telecom monopolies, only 1 percent of the population has access to high-speed fiber optics — which is the same as In China, a developing country six times poorer than Europe. In contrast, U.S. Internet providers have been forced to invest thanks to competitive pressure from telecom and cable operators, and the fiber coverage is ten times higher than in the EU and China.

Overregulation and the lack of open competition are the reasons why there are no European Googles. Congress should send a clear message that the bipartisan approach over the last two decades has worked effectively. Considering how broadband regulation in Europe, the U.S. should think twice before choosing a regulatory framework that gives the executive a greater control of the Internet — how worthy the purpose may be.

Hosuk Lee-Makiyama is director of the Brussels-based European Centre for International Political Economy and a former representative to the UN and World Trade Organization.