Net neutrality is corporate welfare

August 07, 2017

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Corporate welfare unites people from both sides of the political spectrum. People on the left hate it because they think corporations are evil. People on the right hate it because they think taking your property against your will is evil. There are also many on both the left and right who benefit from corporate welfare and they, not surprisingly, are its biggest fans. It’s hard to justify Prime Minister Trudeau and Premier Wynne’s recent gift of 200 million taxpayer dollars to Ford Motor Company – unless you happen to be one of the 500 people whose jobs will be temporarily saved as a result. Or part of their family. Or one of their friends. Or the politician who wants their vote to stay in power.

One can see how this kind of in-your-face corporate welfare could exist even though it’s condemned by all sides as wasteful and unjust. However, when politicians transfer wealth from Canadians to corporations, they’re usually much more subtle about it. A Fraser Institute study published in 2014 found that between 1980 and 2009, Canadian taxpayers were forced to spend a whopping $683.9 billion on subsidies. It’s very difficult to track how and where the money was spent, but it’s safe to assume Canadians could have spent it better themselves.

Take Canada’s telecom industry. Thanks in large part to the government’s protectionist policies, the sector is known for its high prices and chronic lack of competition. Consumers pay more so Canadian telecom giants like Bell and Rogers don’t have to compete with foreign companies who may very well do a better job.

Now a new form of corporate welfare is being introduced into the industry. This time, Bell and Rogers get the short end of the stick along with their customers. “Net neutrality” is the name of a body of regulations that force internet service providers, or ISPs, to treat all data the same way. This stops them from slowing down data from some sites (throttling), charging sites to use their infrastructure, or not counting specific data toward a customer’s usage (zero-rating).

Montreal-based ISP Videotron had been offering an “Unlimited Music” service as part of some of their plans. Customers could stream as much music as they wanted without it counting toward their data limit. In April, the Canadian Radio-television and Telecommunications Commission (CRTC) ruled that this sort of plan would no longer be allowed in Canada.

Of course it did. The CRTC never met a regulation it didn’t like, and would be happy to control our entire telecom industry from top to bottom. The results of the CRTC’s bad attitude and bad policies are plain to see –  just check your bill every month. A 2016 Nordicity study commissioned by the CRTC itself confirmed that Canadians pay some of the highest prices in the world for fixed and mobile internet access. The CRTC’s new regulations will make these prices even worse by removing an ISP’s ability to charge the corporations that rely on their service.

Net neutrality’s biggest supporters are internet giants like Netflix, Google, Amazon, and Facebook. As the internet’s middlemen, ISPs connect these companies to consumers. Both parties benefit, and both parties should share the cost of that connection. According to a 2015 study by Sandvine, a Canadian networking equipment company, Netflix accounted for 34.7% of all fixed access traffic in North America. Is it fair for consumers to bear the full cost of that bandwidth when Netflix collected $8.83 billion in revenue in 2016? With net neutrality, ISPs and their customers lose, while Netflix gets a free ride to Profit Town at our expense. Google’s YouTube accounted for 16.88% of traffic, while Amazon Video and Facebook came in at 2.94% and 2.51%, respectively.

Many popular YouTubers and other content creators are vocal supporters of net neutrality. They’re scared a market-based solution to bandwidth allocation might cut into their profits. I think their fans and their employer should pay their bills, not Canadian consumers. The best case for net neutrality is that it stops ISPs from engaging in shady business practices like restricting access to a competitor’s content.

But competition and market forces already ensure that examples of these practices are almost impossible to find. After all, if you don’t like what your ISP is doing, you can switch to another with one phone call. Now hand the power to control and regulate internet access to the government. If it does something you don’t like, switching to a different one isn’t that simple. Since 2009, the law has required ISPs to be clear and transparent about their throttling practices. Why not let consumers have the final say?

Thanks to competition and private investment, the internet is more accessible and more affordable than ever. Jeopardizing that progress with net neutrality regulations would be a big mistake. Even the Federal Communications Commission (FCC), the CRTC’s American counterpart, announced in May that it would be scrapping its net neutrality regulations. In its statement, it cited reduced investment, innovation, and competition as major reasons for the roll-back. It’s long past time for all Canadians, especially conservative Canadians, to take a stand against crony capitalism.

We know subsidies hurt taxpayers. We know they hurt other businesses and their employees in the industry. We know they hurt the balance of consumers. We know they create inefficiencies and stifle growth. We know they mean less choice and less freedom for everyone. Multibillion dollar corporations like Netflix and Google don’t need intervention from the CRTC or subsidies from Canadian consumers. They’re doing just fine on their own, thanks.



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