Once upon a time, long ago (we’re talking 2015), the Federal Communication Commission took the revolutionary step of passing a net neutrality rule that, simply put, barred internet service providers from using their control of that cable to your house or business to undermine competitors, favor their own content or squeeze premium rates in exchange for higher speed or wider bandwidth. Unsurprisingly, the ISPs, which have limitless money for lawyers and lobbyists, opposed this vigorously. Because their biggest asset is Ajit Pai, one-time lawyer for Verizon and now chairman of the FCC, losing in 2015 did nothing to slow their drive to rule the internet like robber barons.
Perhaps because entrepreneurs admire persistence, you might be tempted to applaud that they succeeded in getting the FCC to take the first steps in tossing out the rule (passed by the loathed Obama Administration), clearing the path for new regulations amenable to Chairman Pai’s former and, who knows, maybe future employer. There are many steps to be taken, and perhaps a new federal communications law to be passed, before that comes to pass, but the basic idea that the internet is equally open to all has been discarded.
If your dream is to build up your online business into the next Hulu or Netflix, it’s time to wake up. If you aren’t that big already, you never will be. If what was illegal under the discarded rule becomes legal, only the companies that are already big will have the money required to be the biggest.
Entrepreneurs are marked by the conviction that they can build their future solely on the strength of their own hard work and choices. This is a powerful and charmingly naive mindset that overlooks the profound influence law, regulation and established position in the marketplace have on what effort can achieve and what we have to choose from. Generations ago, when electricity and telephone service were new, U.S. law and regulation was structured to build universal access to both. That’s why it is a very rare for a farmhouse anywhere in America to be without lights and a telephone.
For a generation or so, we’ve put our faith in loosely regulated profit-driven corporations to build our broadband infrastructure, which is the equivalent now of phones and electricity in the early 20th century. We tell ourselves everything is different now when the truth is that our technology is different but how people and corporations respond to incentives is not. It was obvious a century ago that no sane private company would spend the money to connect phone and power lines where houses are far apart. Nobody a century ago could imagine the internet but they would have no trouble understanding why big cities have it and isolated communities do not. What would surprise them is that the FCC’s vote to overturn the net neutrality rule included killing a provision to make it easier for cities to build broadband infrastructure on their own. It has become an article of faith that the market will solve every problem. Suggesting local governments might do it sooner is blasphemy.
In 1890 the director of the census, Frederick Jackson Turner, caused a huge uproar by declaring the frontier “closed.” All Turner meant was that population density had everywhere surpassed the threshold defining “frontier,” but the notion of the frontier has a powerful mythical resonance in America. The nation was cast into deep introspection by the idea there was no longer a frontier where a person could define his or her own destiny. When the internet was still new and not yet synonymous with Google, it was seen as the new frontier where everything was possible because the rules had not yet been written. Ajit Pai is the Frederick Jackson Turner of our time, delivering the bad news that there are limits on our dreams that have been drawn by bureaucrats with the interests of corporations in mind.
The loss of net neutrality is a very loud wake up call for entrepreneurs. You may aspire to grow your startup into a giant corporation but you have to compete against giants who have written the rule book. There is no market solution for a rigged market.