This principle is easy for the relatively well-off to forget. I have no interest in drinking low-quality Scotch, but many people in the world may be able to afford nothing better. Rules that remove low-quality Scotch from the marketplace make those people worse off. It’s true, the rules may protect those who want only high-quality Scotch: Go to the store and buy any bottle—if mediocre Scotch is banned, then any bottle you pick will be a good one. But this protection for the rich is provided at the expense of the poor. Before we ban low-quality products from the marketplace, we might, as they say, check our privilege.
Low-quality Scotch is part of the optimal stock of Scotch. Not everyone can afford a Mercedes: Low-quality cars are part of the optimal stock of cars. Sometimes all you need is really basic medical advice: Low-quality doctors (and non-doctors!) are part of the optimal stock of doctors. Maybe you just need to get your hair braided, and you don’t need your stylist to know how to do other things: Low-quality stylists are part of the optimal stock of stylists.
I recalled this early economics lesson when I attended NETmundial, the global Internet governance meeting that took place last week in Brazil. A large contingent of civil society participants was deeply upset that the meeting’s final output document did not include the global net neutrality mandate it had been pushing for. It was concerning that nobody seemed to realize that this measure would reduce access to the Internet for the world’s poorest.
In much of the world, the net is not neutral, thanks to companies like Facebook and Google. Facebook Zero is an initiative launched in 2010 to give customers of 50 carriers, mostly in the developing world, access to a lightweight version of Facebook on their WAP-enabled feature phones at no charge. Users can post, like, poke, and comment to their hearts’ content, but if they want to view photos or access non-Facebook sites, they incur the usual data charge. The model has been so successful at growing Facebook adoption in Africa that Google followed suit with a competing offering, Google Free Zone in 2012. Lest anyone think that this is a cruel ploy by evil, for-profit corporations to trap the poor inside their walled gardens, the non-profit Wikimedia Foundation also copied Facebook’s idea with Wikipedia Zero, to great effect.
You may think that walled-garden access to Facebook or Google is inferior to neutral Internet access—and you’d be right. But if the neutralistas got their way, people in developing countries wouldn’t have better Internet access; many of them would have nothing. Wikimedia notes that in Kenya, mobile service costs can exceed 25 percent of monthly income. “Additionally, nearly 1 in 5 have reported that they will forgo a usual expenditure (such as food) in order to reload phone credit.” Low-quality (free) Internet access, therefore, is part of the optimal stock of Internet access.
As if it weren’t enough to connect the world’s poorest for the first time, non-neutrality can also help to fund necessary network buildouts on an ongoing basis. By giving access to Facebook, Google, and Wikipedia away as a loss-leader, carriers are serving with their basic tier of service those who can’t afford more, and habituating those who can afford to click beyond the walled garden to using the mobile web. This price discrimination not only increases access but also raises more revenue than a neutral strategy would. Developing-world carriers need that revenue if they ever intend to build the kinds of networks that will support widespread Internet use. Net neutrality, in other words, would not only keep the poorest offline, it would keep investment in poor-country telecom infrastructure down for longer.
A similar, but less stark, dynamic is playing out in rich countries. Anyone who has ever used their Kindle’s included 3G service has benefited from network non-neutrality; after all, you can’t use it to access non-Amazon services. Absent Amazon’s non-neutral arrangement with wireless carriers, you’d have to pay a nontrivial monthly fee to access books via the cellular network, which would mean that most people would forgo cellular and stick to Wi-Fi. Again, we observe a non-neutral arrangement expanding access and saving people money.
Fortunately, at NETmundial, harder heads (and deeper pockets) prevailed, and the net neutrality mandate was stripped from the outcome document, not without much wailing and gnashing of teeth. Despite their setback, stakeholders have vowed to continue pressing the issue in other international fora. While I am saddened by their I-want-a-pony understanding of economic tradeoffs, one has to admire their determination. Perhaps at the next gathering I will have to buy them a round of Walmart Scotch.