Usually I try to avoid using the Fist to talk about current political issues by bringing history to bear, but in this case I decided it was appropriate to do so, as long as I flagged it as an opinion piece. The current debate on net neutrality seems to rest, in part, on a debate about whether or not internet service providers should be forced to treat all content identically when delivering, i.e. if internet providers should be bound by the idea of the “common carrier.” This in turn is challenged by others who argue that the government should not be allowed to get into the business of regulating the internet, should not treat internet providers as “common carriers”, and also it is perfectly reasonable for internet providers to charge different amounts based on the need, or ability to buy preferential treatment, of certain internet businesses over other internet businesses. The last is the topic that I find personally most concerning, as the United States has dealt with this issue in the past, in the form of the Standard Oil Company, John D. Rockefeller (pictured above), and eventually the Interstate Commerce Commission.
John D. Rockefeller eventually formed the Standard Oil Company (unflattering depicted above) but he began building an oil producing combination through a combination of buying up local oil producers and negotiating special rates for his product to be shipped on the railroads. Furthermore he negotiated that in the event his rivals product was shipped, the railroads would pay him a bonus equal to the difference between his special rate and his competitors shipping rate. This plan was codified in the South Improvement Company. (It also agreed to share all his competitors rates, shipping schedules, and costs with Rockefeller.) In turn the oil traffic was divided up among the various member railroads to provide a fixed rate of shipment and a guaranteed market share to each member, cutting the “chaos of cost cutting competition.”
Now the South Improvement Company never took off, Rockefeller’s rivals called foul and public pressure, along with near violence in some areas, led to the collapse of the scheme. Rockefeller though simply continued with his previous method of operation, including negotiating secret deals and rate rebates so that his oil shipped at lower prices than his competitors, despite it being the same oil. This in turn was the foundation upon which the Standard Oil monopoly was based, and although it was later broken up through the Sherman Anti-Trust Act this naked favoritism in the use of a commonly valued commodity moving network led to the Progressive’s pressuring the United States government to reform railroad.
This led to the passage of the Interstate Commerce Act in 1887 and, with it, the creation of the Interstate Commerce Commission. Now the commission was not all success and wonder, it ended up becoming to some a major regulatory burden on the free market and a point of protection for the industries it was trying to regulate, but what it did do was eventually force a system of uniform rates on the railroads and made them into a true “common carrier” of cargo. This was done solely to prevent a future deal in which “sweetheart” deals could be struck by some companies to gain favor in using a common freight delivery system over their competitors, competition considered unfair. Considering the role the internet plays in commerce today, and its commonalty with the railroads of the past, it seems to my eye history provides a solid lesson in what happens if regulation to enforce uniform rates and fair access is not enforced.
Hint – it ends up with a lot of independent producers being gobbled up by one sneakier/more success competitor that uses rate manipulation to gain an edge.
Sources: Wikipedia entries on South Improvement Company, Interstate Commerce Commission, Interstate Commerce Act, John D. Rockefeller, two different articles in the Marquette Law Review on the Interstate Commerce Act, a Wired article that discusses the connection between the act and the internet, and a contrary blog post on the subject