Net Neutrality and Your Wallet

I'm all for consumers being able to visit any website they want to view content in any format.  I've enjoyed watching TV shows on Hulu and other video web sites, watching YouTube videos, funny or other, and browsing new video sources to see what's available.  I also understand the business perspective of the companies who have invested billions of dollars to build the networks, wired and wireless, over which my entertainment is delivered.  These companies do this, in a capitalist society such as ours, to provide a service at a level of quality for which Joe Consumer will pay a reasonable fee, providing a return on investment (ROI) that meets the corporate threshold.  Otherwise, why invest the money?  Its no different than you or I going to the bank to see CD rates are less than 1%.  Why put money into a CD if another investment pays a higher ROI?  You wouldn't.

Permitting anyone to establish a business that depends on a delivery system (i.e. broadband, wireless, etc.) for which they have made no investment, and that has the capacity to diminish the quality of existing services provided by the owner of this network, eventually impacts ALL consumers in several ways.  First, if you are a network user and find the network slow, your calls dropped or you are not able to connect, the first person you blame is the company that owns the underlying network.  Those of you who are AT&T wireless subscribers know what I mean if you live in an area with heavy iPhone usage (NYC, SF, LA, among others).   The network was not designed to accomodate the volume of video traffic the iPhone is generating.  Perhaps an AT&T oversight when cutting the deal with Apple and by not changing the cost of the data plan, initially, for iPhone users Vs traditional users.

Second, to correct this problem, the network owner will have to invest more money in the network to add capacity and to manage network traffic.  If you were paying attention in earlier paragraphs you know what this means.  The investment is made based on the understanding that the investment will generate an ROI that is in excess of the company's cost of capital.  How will this happen, other things being equal?  Right, the cost to the consumer will increase in the form of higher monthly subscriber fees, data plans, unlimited text messaging plans and other fees that have yet to be conceived.

Take another example.  Both Federal Express and UPS have invested billions of dollars to make overnight package delivery amazingly efficient.  They have developed systems to track packages to a specific location, to track their trucks and planes enroute, and to optimize fuel economy by suggesting the best route a driver should take in delivering the day's packages, reducing fuel costs.  Now imagine if the federal Government said to them, you know, we have this little problem at the USPS.  Its inefficient, its outdated and frankly more people are using email and online services to transact their business.  We could keep increasing postal rates and taxes to cover the cost of operating this dinosaur, or YOU could deliver the mail for us.  Being saddled with a cost and service requirements for which their networks were not designed means one thing, the cost of your overnight shipment will skyrocket, or you will start paying a fee to open your mailbox.

So, while the Government debates net neutality, and the rules for implementation, remember one thing.  As good old Dr. Law often stated in Econ 101, there's no such thing as a free lunch!  Prepare to open your wallet, its going to cost you more in the long run, someway, somehow.