Economists’ Statement on Network Neutrality Policy

SSRN Electronic Journal, 2000

In the authors' shared opinion, the economic evidence does not support the regulations proposed in the Commission's Notice of Proposed Rulemaking Regarding Preserving the Open Internet and Broadband Industry Practices (the "NPRM"). To the contrary, the economic evidence provides no support for the existence of market failure sufficient to warrant ex ante regulation of the type proposed by the Commission, and strongly suggests that the regulations, if adopted, would reduce consumer welfare in both the short and long run. To the extent the types of conduct addressed in the NPRM may, in isolated circumstances, have the potential to harm competition or consumers, the Commission and other regulatory bodies have the ability to deter or prohibit such conduct on a case-by-case basis, through the application of existing doctrines and procedures. Hence, the approach advocated in the NPRM is not necessary to achieve whatever economic benefits may be associated with prohibiting harmful discrimination on the Internet.

2011

The Federal Communications Commission's Network Neutrality Order regulates how broadband networks explain their services to customers, mandates that subscribers be permitted to deploy whatever computers, mobile devices, or applications they like for use with the network access service they purchase, imposes a prohibition upon unreasonable discrimination in network management such that Internet Service Provider efforts to maintain service quality (e.g. mitigation congestion) or to price and package their services do not burden rival applications. This paper offers legal and economic critique of the new Network Neutrality policy and particularly the no blocking and no discrimination rules. While we argue the FCC's rules are likely to be declared beyond the scope of the agency's charter, we focus upon the economic impact of net neutrality regulations. It is beyond paradoxical that the FCC argues that it is imposing new regulations so as to preserve the Internet's current economic structure; that structure has developed in an unregulated environment where firms are free to experiment with business modelsand vertical integrationat will. We demonstrate that Network Neutrality goes far further than existing law, categorically prohibiting various forms of economic integration in a manner equivalent to antitrust's per se rule, properly reserved for conduct that is so likely to cause competitive harm that the marginal benefit of a fact-intensive analysis cannot be justified. Economic analysis demonstrates that Network Neutrality cannot be justified upon consumer welfare grounds. Further, the Commission's attempt to justify its new policy simply ignores compelling evidence that -open access‖ regulations have distorted broadband build-out in the United States, visibly reducing subscriber growth when imposed and visibly increasing subscriber growth when repealed. On the other, the FCC manages to cite just one studynot of the broadband marketto support its claims of widespread foreclosure threats. This empirical study, upon closer scrutiny than the Commission appears to have given it, actually shows no evidence of anticompetitive foreclosure. This fatal analytical flaw constitutes a smoking gun in the FCC's economic analysis of net neutrality.

2006

U.S. policymakers are in the midst of an active debate over how best to accelerate the build-out of next-generation broadband networks. The U.S. economy has a significant economic stake in the outcome. It is increasingly apparent in the global economy linked together by the Internet that the future competitiveness of individual firms, and indeed entire economies, depends heavily on being able to communicate on state-of-the-art networks. Nextgeneration broadband networks will be significantly more expensive than earlier versions. In the United States alone, the required investment to deploy such networks ubiquitously could exceed $140 billion. This investment will not be made unless those who supply the funds for it are compensated with a rate of return commensurate with the risk. In virtually all private sector markets, firms that undertake investments have sufficient freedom to fashion the way in which they offer the products and services those investments make possible and to price them in ways that meet customer demands and optimize their returns. In the broadband Internet access market, however, advocates of proposed network neutrality ("net neutrality") regulation would restrict those who are planning to build out next-generation broadband networks from having these freedoms. This paper examines one particular aspect of the "net neutrality" proposals: "nondiscrimination" requirements relating to the provision of network quality of service (QoS) to content providers. The paper concludes that such requirements, however innocuous they may seem, actually would be detrimental to the objectives that all Americans seemingly should want-namely, the accelerated construction of next-generation networks, and benefits of lower prices, broader consumer choices, and innovations these networks would bring. The paper also concludes that under the best of circumstances, even if networks are significantly upgraded in the presence of net neutrality rules, the proposed non-discrimination provisions would provide incentives for those who would build and operate networks to offer "blended" QoS levels that are "too high" for some applications and "too low" for others. Mediocrity in broadband service is hardly an objective that policymakers in the United States should be trying to achieve. † Senior Fellow, Economic Studies Program, The Brookings Institution and Vice President of Research and Policy, Kauffman Foundation † † President, Criterion Economics. We thank Robert Hahn and Evan Leo for helpful comments, and AT&T Inc. for research funding. The views expressed here are solely our own.

ACM SIGCOMM Computer Communication Review

The Network Neutrality (NN) debate refers to the battle over the design of a regulatory framework for preserving the Internet as a public network and open innovation platform. Fueled by concerns that broadband access service providers might abuse network management to discriminate against third party providers (e.g., content or application providers), policymakers have struggled with designing rules that would protect the Internet from unreasonable network management practices. In this article, we provide an overview of the history of the debate in the U.S. and the EU and highlight the challenges that will confront network engineers designing and operating networks as the debate continues to evolve.

Journal of Competition Law and Economics, 2015

On February 26, 2015, the Federal Communications Commission (FCC) issued new regulations for the Internet. A significant stated motivation for these regulations is the protection and promotion of the quality of Internet service. This paper provides information about the evolution of the quality of Internet service, providing context for this central stated motivation of Internet regulation, including the merits of rules restricting payments by content providers for priority treatment of certain Internet traffic. The history of the FCC's Internet regulations (or lack thereof) is reviewed, the main arguments for and against imposing ex ante price regulation on Internet Service Providers (ISPs) are outlined, and data on industry performance, particularly subscribership levels in general and at substantially increasing speeds in particular, are described. This experience indicates that apparent insufficiencies in competitive alternatives at the fastest available speeds have been ameliorated in fairly short order by new offerings by multiple ISPs. These findings strongly suggest that basing new restrictions on a putative dearth of competition for recently available service levels and transmission speeds is likely to be overtaken by technological and market developments, rendering such ex ante rules superfluous, at best, and counterproductive to competition and innovation, at worst.

International Journal of Communication, 2007

The debate over "network neutrality" has recently emerged as the single most important communications policy issue-at least within the United States-that is now being debated around the world. The resolution of this debate may greatly influence what applications and content are available to Internet users, which business models are successful for service providers, which modes of social communication develop, and which technical designs are effective. As applications move to become Internet Protocol (IP)-based, the reverberations will also reach those sectors that build on or compete with the Internet, including the telephone, television, radio, and electronic commerce sectors. The magnitude of this issue demands careful consideration by policymakers. The papers in this special issue can serve as a valuable basis for such consideration. While network neutrality has been defined many ways that emphasize different goals, a central component of network neutrality concerns the extent to which providers of Internet services should be allowed to favor some traffic or users over others, perhaps affecting what content, applications, or devices are used on the provider's network. Much of the debate has surrounded the provision of "last-mile" connections for broadband Internet service, such as DSL or cable modem service, but this debate has also spilled into other parts of the Internet, and even other communications systems such as cellular networks. The origins of the debate have its foundations in twin regulatory and technological developments. From a regulatory perspective, it is worth noting that Neutrality principles were never enshrined in law or regulatory practice. However, the FCC did rule that the underlying transmission components which were required for narrowband ISP service were a "telecommunications service" and so subject to regulation and had to be made available to all on a non-discriminatory basis. In the broadband era, the FCC faced the Jon M.

SSRN Electronic Journal, 2000

One of the most heated debates in the current efforts to re-write the Communications Act has been whether the federal government should impose "Network Neutrality" requirements on broadband service providers. While we argue neither for nor against the need for Network Neutrality legislation in this POLICY PAPER, our analysis shows that policymakers should avoid Network Neutrality mandates that have the intent or effect of "commoditizing" broadband access services since such a policy approach is likely to deter facilities-based competition, reduce the expansion and deployment of advanced communications networks, and increase prices.

Competition and Regulation in Network Industries, 2008

In this paper, historical functionalities of the traditional Internet are contrasted with today's Internet functionalities of the “smart” Internet architecture. It is shown that network neutrality regulation prohibiting congestion management and traffic quality differentiation is contrary to economically founded allocation mechanisms. By regulation of remaining monopolistic bottleneck components within the local loop the transfer of market power from the telecommunications infrastructure into the complementary Internet access service markets can be avoided. Regulation between access service providers and Internet application service providers is not only superfluous but detrimental.

2014

The concept of network neutrality, although disputed, is generally conceived as the need to ensure a fair use of the internet to all stakeholders. Its most widely defended interpretation postulates that putting hard constraints on how network operators control the data transferred is sufficient for an effective implementation of the concept. Except for security and technical management issues, network operators cannot discriminate against data based on their transmitter, receiver, content or a combination of these criteria. This essay argues that such a regulatory framework is not sufficient for a true democratic development of the internet. Through different examples, it will show that multiple biases exist in today's internet. It therefore defends an extension of the regulatory scope to other internet stakeholders and the adoption of new regulation mechanisms and new regulators. It proposes three regulation principles and discusses how regulation mechanisms in keeping with these principles can increase online neutrality and meet some of the current challenges of the internet. This essay does not claim to answer all the ongoing questions, nor does it claim that the different regulation mechanisms proposed are easy to implement. It must be seen as a contribution to the continuous debate regarding the balance which must be established between the freedom of all internet stakeholders and the regulations required to ensure a fair use of the internet for all.

Journal of Competition Law & Economics, 2006

Network neutrality" is the shorthand for a proposed regime of economic regulation for the Internet. Because of the trend to deliver traditional telecommunications services, as well as new forms of content and applications, by Internet protocol (IP), a regime of network neutrality regulation would displace or subordinate a substantial portion of existing telecommunications regulation. If the United States adopts network neutrality regulation, other industrialized nations probably will soon follow. As a result of their investment to create next-generation broadband networks, network operators have the ability to innovate inside the network by offering both senders and receivers of information greater bandwidth and prioritization of delivery. Network neutrality regulation would, among other things, prevent providers of broadband Internet access service (such as digital subscriber line (DSL) or cable modem service) from offering a guaranteed, expedited delivery speed in return for the payment of a fee. The practical effect of banning such differential pricing (called "access tiering" by its critics) would be to prevent the pricing of access to content or applications providers according to priority of delivery. To the extent that an advertiser of a good or service would be willing to contract with a network operator for advertising space on the network operator's affiliated content, another practical effect of network neutrality regulation would be to erect a barrier to vertical integration of network operators into advertising-based business models that could supplement or replace revenues earned from their existing usage-based business models. Moreover, by making end-users pay for the full cost of broadband access, network neutrality regulation would deny broadband access to the large number of consumers who would not be able to afford, or who would not have a willingness to pay for, what would otherwise be less expensive access. For example, Google is planning to offer broadband access to end-users for free in San Francisco by charging other content providers for advertising. This product offering is evidently predicated on the belief that many end-users demand discounted or free broadband access that is paid for by parties other