Is the Internet a public utility?

by Ian Rosenwach on 2.3.2014

The question is, Has the Internet become so fundamental to our lives that it is, in essence, a utility that should be subject to regulation? (NYT)

Nick Bilton poses the above question today on the New York Times’ website. It’s a question that is at the heart of the net neutrality debate.

Net neutrality refers to the debate around whether companies that deliver Internet content to consumers’ homes (Internet Service Providers or ISP’s) can charge certain content companies for access to an Internet “fast lane”. This fast lane would result in their content getting preferential treatment when it’s streamed to the homes of millions of customers, creating a competitive advantage.

One thing I’d change about the above sentence is change “utility” to “public utility.”

At it’s most basic, the word “utility” can be defined as something useful. There are many utilities in life, from toothbrushes to cell phones to the Internet, but only a select few that are public utilities.

What is a Public Utility?

public utility (def): a business enterprise, as a public-service corporation, performing an essential public service and regulated by the federal, state, or local government.

Whether or not something is a public utility hinges on the definition of an essential public service. Public utilities include organizations like like  natural gas, electric, telephone, and water companies.

These are services that people in a society need to survive (e.g. water), but also services that help us maintain a quality of life that we have come to expect. They keep order. Without them, there’s an increased risk of political and social instability. Government’s decide which services are essential to their citizens. Quite the responsibility! The Internet is not considered a public utility under federal law today.

If the answer is YES and the Internet IS considered a public utility, the government would have the right to tell ISP’s that they can’t make deals with large content companies to put their content on an Internet fast lane.

If the answer is NO and the Internet IS NOT considered a public utility, then the government would take a laissez-faire approach and ISP’s can cut deals to give certain companies’ content access to an Internet fast lane.

Impact on Innovation

One of the common arguments of net neutrality proponents, and one that I can sympathize with, is that if ISP’s were allowed to prefer certain content the companies that would suffer most are startups and new companies that disrupt the media balance.

For example, Consider a case like Aereo.

In a world with Internet fast lanes Aereo’s chances of survival are significantly slimmer. Aereo is a text book case of disruption- they take broadcast TV signals and deliver the content to consumers without paying a toll to the cable companies. Consider that ISP’s in many cases are also your cable provider.

If ISP’s were allowed to prefer certain content, I don’t think Aereo’s content would be slowed down. That would be too brazen and heavy-handed.

But since the larger and more cash-rich companies might be paying for fast lane access, the consumer perception may be that Aereo is slow. Considering the reliability we’re all used to with TV, any service where the perception is one of a lack of reliability is more unlikely to gain mainstream acceptance.

So, what do you think – is the Internet a public utility?

(Editor’s Note: This post is meant to stimulate thought and discussion, not to take a position)

  • Your analysis of public utility is slightly off. Internet service becomes a public utility once it is subject to local, state, or federal regulation, such as, gas, water, electricity, and phone.

    Whether a utility becomes a public utility, or regulated utility, is dependent on whether the utility is “fundamental” to society’s health, welfare, and/or pursuit of happiness, meaning the pursuit of financial gain, i.e., economic interests. This is a legal and/or legislative decision.

    If something is a public utility, the implications are more far reaching than the “fast lane”. Designing internet a public utility impacts the amount of money internet providers can earn. By correlation, health insurance companies are required to invest 85% of all revenue towards patient care, in essence, capping profit to 15%. A similar cap could be put in place for internet providers, which could be very good for consumers.

    In addition, internet providers may be required to allow third party servers to lease their infrastructure, a la gas lines, and phone lines. This also could reduce internet rates for consumers. One just has to remember what happened to long distance rates in the 90’s when phone companies were required to allow third parties to offer competing rates.

    In the end, I believe there is little doubt as to whether internet service is a public utility. Nearly every company and individual in the country relies on the internet to conduct business and personal affairs. It is completely essential to nearly everything we do in life. At this point, it is even more essential than telephone lines.

Previous post:

Next post: