Net Neutrality: Yes, Mark Cuban, Atlas Is Shrugging

Robert Tracinski:

Billionaire investor Mark Cuban recently commented, about a push for new regulations on the Internet, that “In my adult life I have never seen a situation that paralleled what I read in Ayn Rand’s books until now with Net Neutrality.” He continued, “If Ayn Rand were an up-and-coming author today, she wouldn’t write about steel or railroads, it would be Net Neutrality.”

She certainly would, but if he thinks this is the first time real life has imitated Ayn Rand’s fiction, he needs to be paying a little more attention. Atlas has been shrugging for a long, long time.

Let’s begin by looking at the case of net neutrality. The Washington Post‘s economics columnist, Robert Samuelson, makes it easier for us by comparing net neutrality to—you guessed it—regulations on railroads.

As a young reporter in the 1970s, I covered the Interstate Commerce Commission (ICC). Created in 1887, the ICC regulated the nation’s railroads and sought to protect the public against abusive freight rates. Congress deregulated the railroads in 1980 and ultimately abolished the ICC. The verdict was that the agency had so weakened the industry that a government takeover might be necessary. Deregulation was a desperate alternative to nationalization.

I mention all this because there are obvious parallels between the Internet today and the railroads in the late 19th century. Like the railroads then, the Internet today is the great enabling technology of the age. Like the railroads then, Internet companies inspire awe and dread. And now there’s another parallel: the resort to regulation.

The specific basis for the comparison was the way the ICC took on the role that the FCC has now assigned itself for the Internet: as an all-purpose regulator with the power to approve or deny the rates and terms set by Internet service providers. Similarly, “The railroads needed ICC approval for almost everything: rates, mergers, abandonments of little-used branch lines. Shippers opposed changes that might increase costs. Railroads struggled to meet new competition from trucks and barges.”

That’s why the parallel to Atlas Shrugged is no coincidence. Before life imitated art, art imitated life. The events in Atlas Shrugged—the creeping government regulations that slowly paralyze Taggart Transcontinental—were based on Ayn Rand’s research into the history of the railroad industry. In a speech she gave in 1964 asking “Is Atlas Shrugging?”—there were already plenty of parallels at the time—she recounted a story about what happened when she submitted the manuscript of Atlas Shrugged to a railroad expert to check it for accuracy. “The first question he asked me, after he had read it, was: ‘Do you realize all the laws and directives you invented are on our statute books already?’ ‘Yes,’ I answered, ‘I realize it.’”

The result, for the railroads, was their slow decline, culminating in the nationalization of passenger rail (which plays such an important role in Atlas Shrugged) under the aegis of Amtrak, that paragon of efficiency that manages to lose money selling overpriced hamburgers to a captive market. Amtrak was formed—under an official name torn from the pages of Atlas Shrugged, the National Railroad Passenger Corporation—in 1971, 14 years after the novel was published.

The Relationship Between Net Neutrality and Atlas Shrugged

But the peculiar perversity of net neutrality is most reminiscent of something from late in the novel—and believe me, you don’t want to be stuck in a scene from the later pages of Atlas Shrugged, when economic dictatorship is closing in and the whole economy is falling apart.  (This is the point at which I should point you to the rather robust spoiler alert that accompanies my articles on Atlas Shrugged.)

Net neutrality bears some relationship to the Fair Share Law, under which Hank Rearden’s production of his new metal alloy has been restricted at the same time that every manufacturer has been told they have a right to an equal share of it. This means that the highest-value, highest-volume users, the ones for whom access to large quantities of high-performance metal is vital—such as Ken Danagger’s coal mines—are required to wait in line behind those who are making golf clubs and coffee pots.

But the perverse rate regulations of net neutrality most resemble the Railroad Unification Plan and the Steel Unification Plan. These are the plans offered by government regulators in an attempt to prop up weak, government-connected businesses. They consist of creating industry-wide “pools” in which all railroad revenues are collected, then shared out equally based on the amount of track each company has to maintain. The details aren’t the same, but the intent is: to collectivize the cost of infrastructure by deliberately divorcing the expense of the service from the actual amount you use it.

In the case of net neutrality, this is an obvious bit of cronyism that is intended to serve the interests of one faction—the faction that has won the political battle for the moment—at the expense of everyone else. It is meant to serve the interests of companies that are heavily reliant on large amounts of bandwidth, such as the Netflix video-streaming service, by giving them equal access to high download speeds at no extra charge. Like many of Jim Taggart’s machinations on behalf of his company, you can see how this will actually be detrimental to firms like Netflix over the long run. A big Internet service provider like Comcast will have much greater incentive to build extra infrastructure to provide for the needs of a client like Netflix, if they can charge extra for it. If they can’t charge extra—if they are banned from charging extra—then they have less incentive and fewer resources to build infrastructure. In essence, this is a plan to slow down or even halt the construction of new Internet infrastructure.

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