Economic Discrimination is How Americans Do Business

Over the past year, the Federal Communications Commission has become mired in its quest to impose strict “net neutrality” regulations on the Internet.  Much of what’s in the proposed rules is consistent with the policy of “vigilant restraint” that originated during the Clinton administration, as well as with enforcement of the Internet Freedoms that former FCC Chairman Michael Powell produced in 2004.

Unfortunately, the current set of proposed rules set forth additional requirements for “non-discrimination” that exceed prudence and defy business reality.    No one would disagree that transparency is a desired and necessary element of our current day Internet interactions.  However, the current FCC’s so-called non-discrimination principle is designed to eliminate the model of economic discrimination that has become a cornerstone of the way Americans do business and entrepreneurs grow.  Enforcement of the FCC’s strange new economic theory could greatly increase the end user cost to engage in regular Internet activity.

In economic terms, “discrimination” is not a dirty word.  Economic discrimination, such as allowing consumers to pay more for premium services or to receive the privilege of “early adoption” of new products, is fundamental to innovation in our thriving economy.  It allows those with greater means to pay more for premium services – with the beneficial consequence of subsidizing broader deployment and affordability of the more generic services desired by consumers with lesser means.

This understanding of economic discrimination, and the role it plays in American enterprise, serves as the basis for the filing that I, and a variety of minority digital media entrepreneurs – including me – submitted to the FCC last week in the agency’s Open Internet docket.

In the online world, allowing economic discrimination is preferable to a requirement of flat-rate pricing models that would require all consumers to pay the same price for Internet use, irrespective of their actual bandwidth consumption.  Of course heavy users would love to pay a fixed price when they’re live streaming movies and games 24/7 without limitation.  But if you’re using less bandwidth-consumptive activities such as managing email, web searching, homework assignments or community organizing, one price does not fit all.  Internet use varies, so why shouldn’t the price we pay vary relative to the nature and consumption characteristics of the services we use?  Why should less advantaged users with modest needs pay so much more per unit consumed relative to premium consumers with greater means?

The potentially negative impact of the FCC’s proposed rule bears even greater consequences for minority entrepreneurs.  Historically, and notwithstanding our innovation and drive, our companies have been unable to adequately access and leverage capital to make us truly competitive with larger mainstream enterprises such as the Googles, Facebooks and Twitters of the world.  Without the opportunity to engage in strategic partnerships with larger content/application providers and Internet service providers, most minority enterprises will find it difficult to reap the full economic benefits of the Internet.  This unintended consequence would result from the FCC’s non-discrimination rule prohibiting the types of partnerships and joint ventures from which minority entrepreneurs – as new entrants rich in creativity, blessed with market demand, but seldom endowed with inherited wealth – can benefit.

Make no mistake about it, our concerns about the non-discrimination principle in no way diminish our desire to preserve an open Internet.  We can all agree that consumers and businesses alike should have the opportunity to access the legal content of their choosing online when they want to, and how they want to, using the devices of their choosing. People should be entitled to decide how and when they get online, whether through a wired or wireless connection.  In this Digital Age, there is also little disagreement that transparency must be an imperative to which content and application creators, as well as Internet Service Providers, must adhere.

Our common aim is clear – we want to maintain the Internet freedoms that those of us who are currently online already take for granted.  And we want to make sure that the nearly 100 million Americans who are not online get the same opportunities that we have enjoyed.

When the time comes to make final decisions on net neutrality, my hope is that the FCC considers the import and impact of the non-discrimination principle on minority digital entrepreneurs and consumers.  Let the Digital Age become the first period in our history in which our great nation is true to its promise of first class citizenship for all.

David J. Grain is the founder, and CEO of Grain Communications Group, Inc., (“GCGI”). Mr. Grain spent more than a decade in the financial services industry, most recently at Morgan Stanley in New York where he focused primarily on telecommunications, media and technology companies.  Mr. Grain earned a Bachelor of Arts degree in English from the College of the Holy Cross in 1984 and a Masters of Business Administration from the Amos Tuck School of Business at Dartmouth College in 1989 with a concentration on Finance and Business Strategy.

Category: Digital Media, Featured | Tags: Federal Communications Commission, Internet Freedoms, Internet Service Providers, michael powell, open internet