The FCC voted to repeal net neutrality rules yesterday. That basically means that internet service providers have more control over the flow of internet traffic into your home. The worry here is that this means they might start charging customers more for usage.

This is a complex debate, but I tend to think there’s a lot of overreaction on both sides. The crazy thing about the internet is that we’ve all kind of been spoiled by it. It was designed as a government program and basically handed to the public for free. But over time the internet has become increasingly controlled by the private sector and that means corporations have to bear the cost of maintaining the network. And here’s the big problem – US broadband providers are barely investing in that infrastructure:

The reason for this is relatively simple – the telco’s are getting double whammied here. Not only are they unable to charge the high data using entities on their network, but they’re seeing their consumers “cut the cord” and unsubscribe from their cable usage. Consumers are swapping from cable to Internet and increasingly adding to the data burden on the network. Consumers are trying to have their cake and eat it too by swapping to lower cost high data using online services. And the telcos are responding by increasing the consumer cost of Internet usage. The worry now is that the cost of all these other services are about to start rising as Netflix and other high data users pass on their costs.

This is a much more complex discussion than the two sides are making it out to be, but I think a big part of what’s going on here is that the Internet is this amazing productivity boosting growth engine that we’ve all been massively underpaying for. We so massively underpay for it that it’s reducing our GDP by 0.74% per year. For instance, when I Google something I often click on Wikipedia and see them literally begging for donations. The same is true across many large websites. Even small websites like this one are incredibly cost intensive, but the user pays nothing. It will always stay that way here at Pragcap, but I think we’re slowly coming to grips with the reality of the Internet – it’s expensive for the providers to operate and maintain.