Recently there has been controversy over the issue of "net neutrality." Companies like Google and Microsoft are trying to get Congress to prevent Internet service providers (ISPs) from charging them higher rates for customer access to their sites. Many groups involved in political activism, such as Gun Owners of America, also expressed a desire to see the ability of ISPs to charge higher rates restricted. They have done this in the name of "saving the Internet."
The common belief is that left to their own devices without government regulation, Internet companies (and all other companies) would do whatever they want with their services. They could, in theory, raise their rates and enact highly discriminatory policies. They could even block out sites altogether. Many people who fear this now call for government to step in and protect consumers from such activities.
In a fully free market, this would not be a problem. If a provider raises rates for Google and Microsoft and blocked certain sites, people who don't like it could simply switch providers. If they really want unrestricted access, there would be providers who would give it to them. And if all the companies somehow conspired to fix prices, new companies would appear to satisfy consumer demand for lower prices.
In contrast, the federal government has attempted to dictate its own vision of how Internet service providers should operate. In 2005, the Federal Communications Commission adopted a set of principles for preserving the Internet:
Consumers are entitled to access the lawful Internet content of their choice;
Consumers are entitled to run applications and services of their choice, subject to the needs of law enforcement;
Consumers are entitled to connect their choice of legal devices that do not harm the network; and
Consumers are entitled to competition among network providers, application and service providers, and content providers.
These principles, if enforced by the FCC, would result in compulsory service on the part of Internet providers. It means that ISPs could not freely contract with consumers for Internet service. With the right amount of political correctness, it could even mean that service providers would be forced to provide access to objectionable content or go out of business!
Furthermore, if rules were imposed on ISPs, it would result in compliance costs as the companies attempt to follow the government's established procedures for ensuring "network freedom." This creates barriers to entry that would prevent new companies from entering the industry to provide alternative versions of Internet service to consumers. In such a case, incumbent companies could very well get away with fixing prices against the wishes of consumers. We can then expect to see the government step in to "solve" this problem that it created in the first place.
Although people find such behavior as charging Google and Microsoft higher rates for the same service to be unpleasant, they must be allowed to proceed unimpeded. Prices are a natural way of allocating resources between all players in the free market and should not be restricted by government.
For example, if Google and Microsoft were really popular, ISPs might need to allocate more bandwidth to support access to their sites. If ISPs were not allowed to charge higher prices for higher bandwidth, they would not provide that bandwidth. Instead, they would choose to provide less for the same price in order to reduce costs. As a result, consumers would not get more bandwidth for accessing Google and Microsoft's web services regardless of whether they are willing to pay.
It is important to bear in mind what makes such innovative activity possible: private property and the free market. Proponents of net neutrality hail companies like Google and Microsoft for having made the Internet what it is today, and claim that higher ISP fees would impede the innovation of such companies. But the ISPs that made web access fast and affordable made the Internet as well. Being able to freely charge prices for services is what makes innovation possible at all. To stifle the free market is to stifle the potential for innovation.
Also, note the irony of promoting net neutrality under the banner of "Save the Internet." It was ISPs that brought us the Internet, as we know it. Net neutrality advocates are calling on the government to protect the Internet from its own creators!