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Blackburn: 'Net Neutrality' — Nationalization of the Internet

Today the Federal Communications Commission is expected to vote in favor of "net neutrality" which will prohibit broadband providers from being the ultimate deciders of their Internet traffic.

This battle has been going on for about five years and even after its expected passage, the Republican-led House next year is anticipated to take up this issue again.

Companies like Amazon.com , Skype and Netflix have voiced their opposition on the new rules. Proponents say the rules would prohibit phone and cable companies from playing favorites or discriminate when it comes to opening or closing their virtual doors if you will, to web traffic.

But as with any regulation there are two sides to it.

One of the leading "net neutrality" skeptics is Congresswoman Marsha Blackburn (R-T,) member of the Energy and Commerce Committee, which has jurisdiction over the Federal Communications Commission. In the Republican led House next year, Blackburn will be the Vice Chairman of the Subcommittee on Commerce, Manufacturing, and Trade. I decided to sit down with the Representative to get her concerns on what this regulation could mean for business.

LL: Should the Government have the right to have such reach into the internet?

MB; There are certainly cases where the government may need to “reach into the internet”. Law enforcement activity is a prime example of this. As a routine matter to regulate, support, or level the virtual marketplace, I don’t there is any need for the government to intervene. “Net Neutrality” advocates, including the FCC Chairman argue that the government should intervene to prevent possible anti-competitive activities by Internet Service Providers. I don’t recall any other time that the federal government has established regulations to guard against hypothetical situations. Further, most of the activities that “net neutrality” seem concerned about are already addressed by FTC regulations.

LL: "Net Neutrality" proponents have been calling for strong regulation of the inner workings of the internet for years. What kind of impact will this have on the industry?

MB: What they are talking about amounts to a nationalization of the internet. Essentially, the Internet Service Providers have leased the bandwidth they need for the Internet’s architecture from the federal government. Now, retroactively, the government is coming back in to change the terms of the lease. Such uncertainty is a disincentive to the ISPs to improve, maintain, or expand their architecture. Currently the ISPs invest $60 billion a year in maintaining and expanding their Internet architecture. Much of that money will dry up after these regulations passed. It is also hinders innovation. ISPs have no interest in developing faster speeds if they can’t charge a premium for those speeds. Consequently, “net neutrality” can be seen as putting an unintended cap on domestic Internet capacity.

LL: The internet has become a valuable part of our economy. What kind of economic damage could this have?

MB: The Internet has tapped into the raw creative power of the American people. It has dramatically lowered transactions costs and made innovation faster and more profitable. The AppStore is a great example of this model. It serves as a forum for innovators to throw up quick and useful software, games, etc. Under proposed “net neutrality”, Apple will have to make that store available to Blackberry apps. If the rule had been put in place a few years ago, we can legitimately ask, would it have proven a disincentive to the whole app marketplace? Would Apple have bothered to introduce the technology? I don’t think they would, certainly not as quickly as they have. Bureaucracies necessarily slow down innovation so they might best understand it and regulate it. Tuesday’s “net neutrality” intervention will start a process by which the innovation we have come to take for granted online will slow dramatically.

LL: There is a very fine light between regulation and over-regulation. Is there a happy medium here?

MB: There is, and we are there. I am always struck when I run a column against “net neutrality”. Invariably someone will say to me, “why do you want to repeal “net neutrality,’” as though the policy is already in place. To me this indicates a deep satisfaction with the status quo. We already have FTC regulations on the books that can be applied to the anti-competitive activity that “net neutrality” advocates worry about. Adding another bureaucracy to the mix isn’t going help matters, it is only going to slow an already dynamic marketplace.

Questions? Comments? Email us atNetNet@cnbc.com

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A Senior Talent Producer at CNBC, and author of "Thriving in the New Economy:Lessons from Today's Top Business Minds."

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