The in today’s age is a necessity for

 

The Internet is a resource
that is utilized daily by millions across the globe. This resource is regulated
and controlled like most other products with a few exceptions. The biggest is
net neutrality. Net neutrality is defined as: “the idea, principle, or requirement that Internet service providers should or
must treat all Internet data as the same regardless of its kind, source, or
destination.”(Merriam-Webster,2017). A recent FCC vote on December 14
overturned net neutrality and now all consumers must wait and see how the new
policies affect internet services barring intervention on a congressional
level. While net neutrality repeal is nothing new since laws were not put into
place till 2015 a sudden change in operation and investment could have dramatic
results. Using information learned in the course, I
intend to show how microeconomic concepts relate to current policy changes that
are being suggested for net neutrality, and how these changes ultimately create
a different economic climate for the internet.

The demand curve for
internet service must be established so that we can further investigate how net
neutrality changes will affect it. Internet in today’s age is a necessity for
anyone trying to accomplish anything. Prices have varied extremely over the last
two decades with entry-level dial-up service in the late nineties starting
around ten dollars and current prices for broadband ranging from thirty to
hundreds of dollars depending on speed choice.  Based on my research it’s safe to say that the
curve is inelastic, which as we know means the price has a relatively small effect on the quantity of the good demanded. There are
two factors that impact a demand’s price elasticity and consider them for the
Internet. The lack of an available substitute might be the
most important factor influencing elasticity. While everyone does not require
an internet connection to survive, with growing technological advances not
having a connection almost sets you behind. A 2011 survey found that 78% of
Americans have internet access and that for “an
Internet connection of 25 megabits per second, New Yorkers pay about $55:
nearly double that of what residents in London, Seoul, and Bucharest, Romania,
pay.”(Yi,2015) This means that internet service providers, or ISPs, can price leverage
their cost for investment by slightly adjusting the price since the internet is
a highly demanded service that is price inelastic.

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Internet
Service has had an identity crisis since conception. Prior to 2015 Internet
service was viewed as a luxury and not the necessity, that the establishment of
net neutrality in 2015 labeled it as. Without net neutrality restrictions, the ISPs could resort to delivering certain
content at reduced speeds, for example, making the streams on Hulu or YouTube
buffer or shut off.  This speed throttling
is illegal based on the title II classification internet service has been
provided. That classification labels internet service providers as common
carriers.” Common carriers have to serve everyone who wants to use the service.
The post office can’t deny service to people sending letters it disagrees with,
and the phone company can’t refuse service to people based on their religious
views. Everyone has the same right to pay to use the service. Common carriers
have to charge everyone the same price for the same service–although, for
example, a railroad could charge more to transport volatile chemicals that need
special handling” (
Cherry& Weinberg,2017)
This strict classification allows all consumers to enjoy a steady price and
easy entry into service since it is labeled as a utility. With net neutrality
laws in place, demand theory does not necessarily apply as providers cannot
upcharge a consumer since more consumers are using a product. However, if a
larger than normal speed is requested then providers are free to charge more
expensive prices for a specialty service. Since net neutrality has now been
revoked internet service will now revert back to a Title One classification
which in simple terms is light involvement regulation, which requires less
reporting from firms functioning in the sector. Technically, this category
means package providers wouldn’t have to reveal how they are handling their
networks. Initially, this seems like a bad idea but with restrictions, removed investments
can be made to improve hardware, but the true benefits or degradations won’t be
seen until an effective marginal analysis can be done on post net neutrality
service. This small change to such a complex system could hold several outcomes
from lowering entry price points for consumers to rampant overcharging of a
necessity by providers.

The fundamental problem with Internet service providers is that all access
points to the world wide web are controlled by a hand full of companies. These
largest two companies are Comcast and Charter Communications, which connects
fifty million plus people in the United States to the web. That’s twenty
million more subscribers than the next for major service providers combined.
This oligopoly exists and net neutrality laws have unique effects on its
structure. With net neutrality in place, internet providers cannot do the throttling
of service as they are required to be transparent by the FCC. This large amount
of governmental interference prevents any sort of free market scenario but
instead allows these large providers to form a perfect example of imperfect
competition. To generate change, we need to take the steps to allow smaller
ISPs to enter the market. This is hard to do accomplish for a few reasons and
that is that this digitized Oligopoly has physical barriers to entry. To
compete you need to lay your own fiber optic cable at great expense or
piggyback off the current existing cable. If the current market leaders control
half the market why would they be willing to allow smaller companies to drive down,
there prices using their own resources? “What we need
is a new competition policy that puts the interests of consumers first, seeks
to replicate what other countries have done, and treats with extreme skepticism
the arguments of monopoly incumbents such as Comcast and Time Warner Cable.”(Cassidy,
2017) This type of competition legislation would present a market similar to
that of the United Kingdom’s telecommunication structure, where smaller
business could enter the market by paying a rental fee to use the existing
ground lines. This process knocks down the barriers preventing startups and
allows lower pricing as the price curve decreases due to increased competition.

In conclusion, the argument of net neutrality seems to be
a tangled web of mysteries and scare tactics from both sides. Even taking an
economic approach from my limited scope doesn’t provide any real clarity.  Yes, I want to use my internet as I please
with no stoppage or outages based on content I view, but I am not against a
little friendly competition arising from the repeal of net neutrality if it
lowers my cost of service. Taking governmental control and oversight out of the
picture also seems a little scary since market oversight has ensured that
pricing has stayed reasonable, even though the market is controlled by the
oligopoly of corporations. As stated previously internet service is price
inelastic and the opportunity cost of internet access is high. The modern world
demands it and without it, you are likely to struggle with studying,
communication, business, anything you name it, but the way it supplied may
change. An oligopoly giant may fall, and barriers to entry may be lowered but
in the end, the future of the internet is still up to governmental control as
they must vote to uphold the FCCs ruling.