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U.S. Prosperity Threatened by Verizon and AT&T's Internet Mugging

On the Monday before July 4, as Americans planned their holiday parties, the Internet got mugged. The assault took place at the courthouse, in broad daylight, yet aside from, few people noticed or cared. However, this assault threatens severe injury to the Internet and to the wonders it brings.

In a legal brief regarding Federal Communications Commission regulations, Verizon Communications claimed the right to edit and restrict the Internet content it delivers through its broadband services. Verizon says it is like a newspaper in that it creates, aggregates, and curates content. It claims a free speech right to filter the content, restrict it, or block it altogether.

Verizon rejects entirely the obligation to carry all websites on an equal basis. It says there is no more justification to require Verizon to carry all web traffic equally than to require the New York Times to cover all stories equally. The company claims to offer an "information service" rather than a "communications service."

Smart Mobile Phone Line-up

While Verizon landed the first punch, AT&T snuck up behind. Wired magazine reported that AT&T has geared up to block certain popular applications from their wireless data service (starting with Apple's FaceTime live video app). Presumably AT&T will unblock the apps for a fee (in addition to whatever bandwidth charges may apply), but the details have yet to be released.

Pay Per Search?

This assault on the Internet threatens consumers, entrepreneurs, and the U.S. economy as a whole. Consumers will suffer as popular services are blocked and new fees are tacked on. For example, consider mobile phone based navigation aids. Right now, if you have an Android phone you can enjoy free navigation service from Google. However, Verizon may prefer that you use their VZ Navigator service. I haven't heard anyone say that VZ Navigator is better, and unlike Google's service, it isn't free. It costs $2.99 a day or $9.99 a month. Today, Verizon lets you use either service, but if they are allowed to "edit" and bundle, how long will they wait before limiting access to free navigation?

Where will this ultimately lead? Perhaps in a few years, your broadband service will deliver "VZ Auctions"—but not Ebay. It may have "VZ Shopping" but not Amazon. "VZ video" but not YouTube. "VZ Friends" but not Facebook. If you want Facebook, Twitter, YouTube, Amazon, eBay, and other favorites, you may need to subscribe to Verizon's super-premium "unlocked" broadband to get them.

Entrepreneurship and innovation are at risk as well. If Internet service providers have the right to "edit" content and block services, they can gut any entrepreneur's business models. What investor will fund the next Facebook if communications giants can target the most successful startups and impose access fees that bleed their potential profits?

End of an Era

Finally, the competitiveness of the U.S. economy will suffer. One of the great strengths of our economy is its openness to new ideas. Entrepreneurs can bring breakthrough products and services to market quickly and relatively inexpensively. For decades, courts blasted away barriers erected by older companies so new entrants could flourish. Would-be entrepreneurs from across the world come to the United States because our more open markets provide greater opportunity.

However, we can't take this advantage for granted. It is eroding already. Even today, Europe maintains a more level playing-field than we do between wireless service providers and device manufacturers.This openness has been better for service quality and for consumer choice. If the United States allows walls to rise and inhibit Internet innovation, while other countries keep the walls down, we will lose. Entrepreneurs will seek the markets are lowest. They'll bring jobs and income with them.

The interests that want to turn the dynamic open Internet into something resembling the closed world of cable television will keep up the assault. If we aren't vigilant they will succeed.If we don't start yelling, the FCC and courts will assume we don't care. They will grant the concessions sought.

Will the Internet continue to inspire extraordinary creativity and entrepreneurship? Or will history record the years 1995-2015 as a short lived "golden age" between two long eras of imposed sterility? That's the choice we are making right now, whether we realize it or not.

(A version of this was posted earlier at