Obama's Not Neutral About the Internet

They all look the same from here.

Photographer: Sean Gallup/Getty Images

President Barack Obama may have won the Internet last week with his strong statement in support of net neutrality. Unfortunately, he has yet to win over the federal agency that regulates the Internet, never mind the cable and phone companies that provide access to it, or the Republicans who say he would stifle it

Still, the president deserves credit for marking an important principle: Like electricity or water, the Internet is a vital public utility, and the companies that provide it should be subject to regulation. At the same time, they shouldn't be regulated too heavily.

Net Neutrality

Giving meaning to this is the task of the Federal Communications Commission. It has been debating new rules for years; a federal court struck down the latest version in January. Both Obama and the FCC claim they want to preserve net neutrality, the principle that says service providers shouldn't meddle with the choices consumers make by blocking sites, slowing down traffic or giving proprietary content speedier passage

In his statement last week, the president got in front of the FCC by urging it to reclassify companies that provide Internet service as common carriers, subjecting them to much the same oversight as other public utilities. Doing so, Obama says, would keep net neutrality and allow the agency to ban "paid prioritization," in which Internet companies demand extra fees from content companies for faster service. 

The president and FCC Chairman Tom Wheeler aren't far apart. Wheeler hasn't said outright what he thinks of reclassification or paid prioritization -- though he has hinted that, unlike Obama, he would accept some of the latter

At stake is maintaining what Wheeler calls the "virtuous cycle" of innovation. By that, he means the Internet thrives because of private-sector investment -- by the content and app creators who rely on it to reach customers, by the companies that keep the backbone technologically up-to-date, by the ISPs that control the last mile to homes. It's an ecosystem that works because innovation by one segment leads to innovation by another. 

An outright ban on paid prioritization might choke off some of this innovation. Limiting revenue, after all, has a tendency to discourage investment.

The question Obama must answer is: Who should pay to upgrade the Internet, which is showing signs of stress? A better approach might be to ask: Why is it so unreasonable for content providers and their customers to pay more for extra service, in the way that the U.S. Postal Service has snail mail and UPS offers overnight delivery but at a price? 

To those who would scoff that this would create a two-tiered Internet, the U.S. already has such a thing. Consumers in many states can choose to pay premium rates for faster connections over fiber-optic cable, while others are content with cheaper, slower service over copper wires. 

By all means, the FCC should police prioritization deals to make sure they are "commercially reasonable" and available equally to everyone who wants them. But it needn't view all such arrangements with suspicion. The federal government should also make sure the Internet is accessible to all and well-maintained. Changing the Internet's legal status to a public utility, while politically difficult, would help further all those goals. 

As the president said last week, the FCC should have greater authority to regulate the Internet. At the same time -- as the president also said -- it shouldn't necessarily exercise it by imposing, for example, rate regulation on Internet providers. 

It's not a terribly satisfying position, and the balance will not always be easy to strike. But it will be necessary for the Internet to remain a driving economic and civic force in America.

To contact the senior editor responsible for Bloomberg View’s editorials: David Shipley at davidshipley@bloomberg.net.