More Government Regulation of Broadband is Not Good for Small Business

By at 28 February, 2017, 4:09 pm

by Raymond J. Keating-

Somehow, more government regulation of the Internet is good for small business? Really?

Well, in effect, that’s the latest assertion from a contributor over at The article tries to gin up still more, baseless net-neutrality fears because the new FCC chairman, Ajit Pai, actually understands how the market works – which it seems we cannot say about the article’s author.

Like many pro-regulation advocates, the article’s author mistakenly embraces the gross federal regulatory overreach by the FCC, under the leadership of then-Chairman Tom Wheeler, and adopted by a partisan 3-2 vote in early 2015, whereby broadband service providers are regulated under Title II of the Communications Act of 1934.

Assorted warnings are highlighted about what might happen if this new regulatory regime were to be rolled back under the Pai FCC, including, of course, the speculation that big businesses will put small businesses “out of business” due to big bad ISPs hampering consumers from getting to the websites of entrepreneurs, small businesses and independent creators. Got that?

So, imposing a regulatory regime meant for a 1930’s telephone monopoly – whereby government dictates business models, pricing and so on – somehow will benefit small businesses in a 21st century dynamic, highly competitive, choice-rich broadband Internet marketplace? If it weren’t so deeply troubling and dangerous for innovation and the economy, such assumptions would be funny.

Is there any basis for these assumptions? No.

The fundamental point is someone how missed that enormous online opportunities for small businesses have come thanks to investment and innovation by broadband service providers and the many entrepreneurs at work in the telecommunications industry, and which occurred under a light regulatory touch endorsed by both political parties in the 1996 Telecommunications Act.

Also missed are the basic principles of business and economics that aggravating your customers by raising costs or limiting service – and understand that both content providers and content consumers are customers in this case – do not make for smart business decisions. The incentives for broadband service providers in this competitive market to act against the interests of their customers and their own shareholders simply do not exist.

Interestingly this piece, a media platform for entrepreneurs – advises small business owners to put their trust in politicians for protection, citing Senator Edward Markey (D-Mass.) as an example of someone on the side of “the little guy.” In reality, though, Markey and Company are on the side of big government, which has never been on the side of the small business little guy. Rather, the increased regulatory burdens pushed by Markey and so many others inevitably fall heaviest on small businesses, whether it be the small businesses that overwhelmingly populate the telecommunications sector – 83.1 percent of employer firms in telecommunications have less than 20 workers and 94.8 percent less than 100 employees – or the small businesses that use the Internet to reach more customers and provide content, and benefit as consumers.

FCC Chairman Pai has simply declared: “I favor a free and open Internet, and I oppose Title II.” He gets it.

(See a recent SBE Council analysis highlighting Chairman Pai’s five sound principles for guiding regulation and his spot-on criticism of FCC regulatory overreach on regulating broadband Internet like an old-time telephone monopoly and another piece highlighting Pai’s early steps as FCC chairman in taking on misguided, costly regulation.)

In the end, the best environment for small businesses is one in which a light regulatory touch allows broadband service providers and other telecommunications and technology firms to invest, experiment, innovate, and work to better serve customers.


Raymond J. Keating is chief economist for the Small Business & Entrepreneurship Council.

Keating’s latest book published by SBE Council is titled Unleashing Small Business Through IP:  The Role of Intellectual Property in Driving Entrepreneurship, Innovation and Investment and it is available free on SBE Council’s website here.


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