Fisher Investments Editorial Staff
Politics

With Liberty and Internet for All

By, 12/23/2010
 

Story Highlights:

  • The Federal Communications Commission decided 3-2 in favor of regulation bringing us closer to "network neutrality."
  • The new FCC ruling doesn't embrace net neutrality in its entirety, but takes steps to that end by requiring transparency, prohibiting blocking, and preventing "unreasonable discrimination."
  • Government intervention can result in negative, unintended consequences, but the FCC rules appear to be watered down from earlier versions.

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(Editor's Note: MarketMinder does NOT recommend individual securities; the below is simply an example of a broader theme we wish to highlight.) 

The Internet has been long praised for being democratic. Pretty much anyone (at least anyone outside countries like China) can access it just about anywhere, anytime, through any terminal, and visit any website with relative ease. Some see the internet as a last bastion of unrestrained freedom. Others see it as an efficient medium for commerce and profit. So it's an interesting—and contentious—debate between those who want to keep the Internet free from regulations and those who want to regulate the Internet to keep it free for all. 

The two camps will no doubt feel differently then about Tuesday's Federal Communications Commission (FCC) 3-2 decision in favor of regulation bringing us closer to "network neutrality." Net neutrality is the idea broadband providers—like Comcast and Verizon—shouldn't be able to favor some customers or content providers over others or restrict access for end users. The idea sounds democratically ideal in theory, but isn't without its complications—or detractors among major players in the industry. 

The new FCC ruling doesn't embrace net neutrality in its entirety, but takes steps to that end. The rules seem to be three-fold: 1) Increase transparency by requiring all broadband providers to publicly disclose network management practices and usage metrics; 2) Prohibit broadband providers from blocking lawful Internet content, applications, services, and devices (while allowing some "reasonable" network management); 3) Prohibit broadband providers from unreasonable discrimination in transmitting lawful data/content or blocking network traffic. Wireless internet providers—like those supporting mobile devices—will be subject to less stringent rules because the industry is still developing and faces challenges like constrained bandwidth. 

But the FCC ruling doesn't set net neutrality in stone. These rules will be challenged by congressional Republicans—and even if they are not overturned on the Hill, they could still very well change shape. There are criticisms on both sides—some saying the rules do not go far enough in ensuring neutrality and others worried the rules would greatly discourage Internet service providers from building new and faster networks. But in essence, the rules seem to be a sort of compromise between the two sides—doing a little now, but not too much, with some ambiguous areas left to interpretation as necessary. 

We are well aware government intervention in free markets can result in negative, unintended consequences, no matter the good intentions. But the FCC rules appear to be a watered-down version of early FCC net neutrality proposals the industry can live with. Investors took the ruling in stride as telecos' and broadband providers' stocks were little impacted by the announcement.  

The Internet can be a dangerous playground for federal regulators if they aren't careful. Because the industry is still relatively new and rapidly developing, regulators must make sure they don't stifle innovation. Whether bloggers and broadband providers can coexist under net neutrality rules remains to be seen. But it will undoubtedly be debated, ad nauseum, in an online forum, naturally.

 

*The content contained in this article represents only the opinions and viewpoints of the Fisher Investments editorial staff.

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*The content contained in this article represents only the opinions and viewpoints of the Fisher Investments editorial staff.

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