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The Government Attack on the Internet

The FCC is considering wrapping archaic telephone rules around high-speed broadband.

Former FCC Commissioner Robert McDowell recently wrote that “the Internet is the greatest deregulatory success story of all time.” It has remained free of intrusive government controls, facilitating the rapid development of entrepreneurial and innovative companies. Many of these firms started small before generating massive valuations, such as the likes of Facebook, Twitter, and recently BuzzFeed. These are some of the big names, but there are tens of thousands of others, like our members’ startups and firms, who have used the Internet to innovate, grow, compete and transform their industries.

However, the Internet is under attack by government. This unjustified regulation would cause irreversible damage to investment and U.S. leadership on innovation.

Small businesses and entrepreneurs routinely harness the power of the Internet to successfully run their operations — from connecting to consumers and suppliers; to mobile apps and cloud software that help them manage their finances and workforce; to accessing capital through lending and investment platforms. The Internet has fostered a collaborative and dynamic environment, and more people have the opportunity to become successful entrepreneurs because of the tools and opportunity it provides.

If the Federal Communications Commission (FCC) succumbs to the small but vocal few calling for utility-style regulation of broadband networks, much of what we are experiencing today will dramatically change, and not for the better. The FCC is considering wrapping archaic telephone rules around high-speed broadband. These rules are designed for the long-gone domestic telephone oligopoly of the 1930s. In regulatory speak, broadband may be reclassified as a Title II telecommunications service, which means that onerous rules and red tape would interfere with existing competition among high-speed broadband providers.

Under these rules, the government could micromanage common business decisions of companies large and small, like managing Internet traffic or determining the various prices for speeds and services consumers could choose from. Imagine how quickly the dynamism of the Internet would disintegrate if Washington bureaucrats were allowed to intrude in these technically complex and market-driven areas.

Internet service providers (ISPs) have invested more than a trillion dollars into maintaining the privately owned networks that serve as the central infrastructure of the Internet. But with unwarranted government interference potentially coming into play, these businesses will have significantly less incentive to make large-scale investments. In Europe, for example, where utility-style regulation of the Internet has been in place for decades, investment per household is $300 less than in the U.S.

At the local level, regional and medium-sized ISPs have invested in rural areas and small towns to extend access to remote communities — a critical undertaking for economic development and job creation in these areas. Perhaps that is why even the smaller ISPs engaged in rural expansion have expressed grave concerns about the FCC’s upcoming regulatory decision. These ISPs assert that a heavy-handed regulatory approach is unnecessary, and could add additional costs and burden to their operations. For smaller ISPs, their survival is at stake.

The online marketplace has grown organically, and has prospered without government interference. The marketplace is competitive, meaning consumers unhappy with the actions of one company can move to another. A competitive broadband market ensures that customers can access the content they desire at the speed and price that is right for them. That will remain the case as long as the FCC maintains a “light-touch” regulatory framework. This cautious approach to regulation has been in place since President Bill Clinton’s FCC argued that “classifying Internet access services as telecommunications services could have significant consequences for the global development of the Internet.” This remains true today.

A survey for the Small Business & Entrepreneurship Council’s Center for Regulatory Solutions found that the public is overwhelmingly concerned about intrusive government regulation. For example, 70 percent believe that regulation “mostly hurts” the economy, with 84 percent saying that “too many special interests” drive a process that is out of touch, and does not consider real-world impact. Clearly, without any market failure to point to as rationalization to regulate the Internet, the FCC feels the need to act at the behest of a vocal minority. Too much is at stake to let agitators ruin the Internet for everyone else.

Especially now, government policies must protect the investment and innovation that have been vital to the Internet’s development, which remains vital to the modern entrepreneurial ecosystem. With the economy still in a weak state, small businesses and entrepreneurs need a cautious government, not an activist one. The FCC can take heed by rejecting Title II regulations.

Karen Kerrigan is the president and CEO of the Small Business & Entrepreneurship Council (SBE Council). Reach her @KarenKerrigan.

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