Obama lobbies the FCC to regulate the Web as if it were telephone service in the 1930s

I worked in a group at Bell Labs that developed the early 300 and 1200 bit-per-second modems. We wanted to test them by sending data from our Western Electric factory in Illinois to our site in New Jersey. But no luck, because Illinois Bell hadn’t set tariffs for data. We had the technology, but regulators lagged far behind.

A boss at Bell Labs in those days explained what he called the Big Lie, using water utilities as an example. Delivering water involves mostly fixed costs. So every decade or so, water companies engineer a shortage. Less water over the same infrastructure meant that they needed to raise rates per gallon to generate returns. When the shortage ends, they spend the extra money coming in on fancy facilities, thus locking in the higher rates for another decade.

If the Internet is reclassified as a utility, online innovation will slow to the same glacial pace that beset AT&T and other utilities, with all the same bad incentives. Research will focus on ways to bill you—as wireless companies do with calling and data plans—rather than new services. Imagine if Uber had to petition the FCC to ask for your location.