Is the Internet a Free Marketplace or Public Utility?

by Scott Lewis

The Internet is most likely the last free marketplace in the world, where you have a product or a service and survival is based on your ability to adapt and create a plan that would drive user consumption. It is also the all-knowing knowledge base for just about everything you want to know. The Internet has become so intertwined in our lives with social media, messaging sites and home security systems, which allow us to open and close our curtains and turn on lights that are all connected. This is all at our fingertips. However, the Internet may no longer be tax-free.

I am a little biased because I own my own business. I also own my own hosting and Internet business, so additional taxes on my clients would not induce them to a happy spot. And the online business investments are in the billions of dollars a year. Oh, did I say taxes? Yes, it would start off with a 16.1% tax and increase every three months from that point if President Obama reclassifies the Internet as a public utility. As a business owner, I like small government and free markets where the best product, the best service and the best price prevail. I have always believed that is the best method to price-control and to create a demand-based economy.

The plan to regulate the Internet is going to hit not only the companies that provide Internet service but web-based services, which is going to affect every American who uses web-based services, and yes, you will get to pay those pesky taxes as well. The plan President Obama is proposing is based on Title II of the Communications Act of 1934, and this would allow the Federal Communications Commission to regulate prices of products or services provided over the Internet and give the agency unprecedented control over those Internet services. Rather than focusing on solving simple regulatory issues, Title II would go far beyond simple consumer protections because the rules are so obsolete that implementing them would impact the entire Internet and the companies that provide service and the users who take advantage of web-based service applications.

The term being thrown around is “net neutrality,” and the government is pushing this based on its desire to prevent Internet service providers from giving some data and data providers a higher priority on the Internet. This comes from a perception that some Internet providers are picking losers and winners in the world of Internet commerce. Most people agree that Internet providers should not be able to determine which companies succeed or fail on the Internet, and most people think there should be some kind of regulation against this, but most people don’t realize the extent to which the government is going to control the Internet and tax the users of the Internet. When you throw that on top of the simple question about net neutrality, then most people don’t support the plan.

There is a big debate around the value of regulation on the Internet; the biggest would be to keep the Internet service providers from having what is called slow lanes and fast lanes. The fast lanes would have priority over the slow lanes, providing a more robust user environment. However, these would be paid fast lanes, and the fear is that only big companies would be able to afford to pay, which would stifle the little guys. While the principle argument against net neutrality is that Internet service providers invest billions of dollars in infrastructure and networking to provide a robust user experience, they need to have the ability to recoup their investment, and by taxing and regulating the Internet, the incentive to invest is simply not there.

I think both are correct. There should be some kind of regulation to protect small and big companies. However, the free flow of information and the enormous growth of online products and services should not be regulated by a law that was passed in 1934. I have to believe that there is a way to not tax the Internet as a utility but provide the protections that companies need to keep the system and the process fair to everyone.

Scott Lewis is the president and CEO of Winning Technologies Group of Companies, an international technology management company. Scott has more than 30 years of experience in the technology industry and is a nationally recognized speaker on technology subjects such as colocation, security, CIO-level management, data and voice communications, and best practices related to the management of technology resources. Learn more at www.winningtech.com or by calling 877-379-8279.