This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

Net Neutrality: A Tax on the Internet

By Mike Jude, researcher at Stratecast (a division of Frost & Sullivan)

Broadband is the new infrastructure on which the 21st century economy is being built. As such, its ubiquity, accessibility and cost to U.S. consumers are critical to our financial future. Net neutrality -- the idea that data on the Internet should be moved without regard to content, destination or source -- has the potential to distort the parameters built into the business models of broadband operators in such a way that will increase expected risk and significantly discourage further industry investment. As a result, the average American citizen will pay the price.

A recent study I conducted for Stratecast estimated the effects that net neutrality regulations would have on consumers and the greater U.S. economy. Our model attempted to look at such regulations on broadband operators through the eyes of a CFO, who is charged, both from a legal and business perspective, to invest the funds of the company wisely. The model indicates that in the presence of net neutrality, investment in infrastructure would decrease, our economy would suffer with job losses, and the costs would ultimately be borne by the consumer.

The most negatively impactful of net neutrality options, strict non-discrimination, would tend to increase operators' costs by anywhere from $20 billion to $40 billion annually. If the operator were unwilling or unable to recover the costs from the subscriber base, then the model predicts that the operator would likely curtail network investment. This would not only lead to an eroding infrastructure, but also to an alarming erosion of jobs and overall economic growth.

Each Internet job spurs additional jobs within the economy. By our estimate, as many as 3.7 million jobs currently depend on the Internet, driving direct and indirect salaries and wages of up to $370 billion. Net neutrality regulations would have a drastic effect on jobs and the economy, and they would impact almost immediately. In 2011 alone, new regulations could impose a seven billion dollar a year overhead on the economy, with a commensurate impact of over 70,000 jobs.

In a scenario where operators would maintain investment in broadband infrastructure, they would be forced to adopt other methods for covering deployment costs, such as creating expensive service bundles or passing along costs to content providers.

1 of 2

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
DOW 16,563.30 -317.06 -1.88%
S&P 500 1,930.67 -39.40 -2.00%
NASDAQ 4,369.7730 -93.1290 -2.09%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs