Introduction to a Special Issue on Network Neutrality

The vast majority of U.S. residential consumers face a monopoly or duopoly in broadband Internet access. Until now, the Internet has been characterized by a regime of “net neutrality,” which means there has been no discrimination between the price of transmitting packets based on the identity of either the transmitter or the identity of the receiver, based on the application, or the type of content the packet contains. Providers of DSL or cable modem Internet access in the United States are taking advantage of a recent regulatory change that effectively abolishes “net neutrality” and nondiscrimination protections. Due to their market power, these service providers are considering a variety of discriminatory pricing schemes. This article discusses and evaluates the effect a number of these schemes would have on the prices and profitability of network access, as well as the effect on complementary application and content providers. This article also discusses an assortment of anti-competitive effects created by price discrimination and evaluates the possibility of “net neutrality” being imposed by law.

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.

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.

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.

International Journal of Communication, 2007

Several factors suggest that meaningful network neutrality rules will not be enshrined in near-term U.S. telecommunications policy. These include disagreements over the need for such rules as well as their definition, efficacy and enforceability. However, as van Schewick (2005) 1 has demonstrated in the context of the Internet, network providers may have economic incentives to discriminate in welfare-reducing ways; in addition, network operators may continue to possess market power, particularly with respect to a terminating monopoly. 2 On the other hand, the literature on two-sided markets, 3 the challenge of cost-recovery in the presence of significant fixed and sunk costs, and the changing nature of Internet traffic all provide efficiency-enhancing rationales for

This article analyzes the comparisons of net neutrality with the pricing of the Internet. We note that the future threats of congestion which call for the renewal of the infrastructure are accompanied by a search for lucre from the operators of the Internet. This tendency has the ambition of creating a deep discrimination of the Internet by imposing pricing at the inter-operator level as well; at the level of the application, content and service providers rather than that of the users. This leads us to glimpse through the prospective method that highly discriminatory and anti-neutral scenarios will ultimately be characterized by individualized pricing.

The neutral architecture of the Internet is being challenged by various parties, such as network operators providing the connections to end-users, who are interested in gaining control of the information exchanged over the Internet. What are the effects on competition and welfare of such practices? Currently, there exists very little economic theory on network neutrality. This paper provides a preliminary analysis of the type of economic modeling that can address network neutrality, as well as of the type of results that can be expected.

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.

bepress Legal Series, 2006

International Journal of Communication, 2007

At the heart of the network neutrality debate is a challenging institutional design problem: the selection of a regime to govern the relations between the stakeholders in the complex value net of advanced communication services, most importantly between platform operators and providers of applications and content. How it is resolved will have far-reaching effects on the future evolution of communication industries. A wide spectrum of arrangements to structure these relations is possible, ranging from a minimally restrictive antitrust approach to highly constraining rules and regulations in a framework of full regulation. Based on a stylized model, the paper examines the innovation incentives of platform operators and content providers in next-generation networks under three scenarios: (1) absence of network neutrality rules, (2) various non-discrimination rules, and (3) full regulation. The discussion reveals that no panacea exists to address the potential problems raised by the network neutrality debate. Alternative specifications of rules will result in different innovation trajectories at the platform and content layers and the system overall. Given the lack of knowledge and the high degree of uncertainty, a strategy of monitoring, combined with a willingness and authorization to intervene if a pattern of abuse becomes visible, seems to be the most appropriate immediate step forward. I. Introduction At the heart of the network neutrality debate is a challenging institutional design problem: the selection of a regime to govern the relations between the stakeholders in the complex value net of advanced communication services, most importantly between platform operators and providers of applications and content. How it is resolved will probably have far-reaching effects on the future evolutionary path of communication industries. A wide spectrum of arrangements to structure this

Telecommunications Policy, 2013

This paper is intended as an introduction to the debate on net neutrality and as a progress report on the growing body of academic literature on this issue. Different non-net neutrality scenarios are discussed and structured along the two dimensions of network and pricing regime. With this approach, the consensus on the benefits of a deviation from the status quo as well as the concerns that are unique to certain non-net neutrality scenarios can be identified. Moreover, a framework for policy decisions is derived and it is discussed how the concept of neutrality extends to other parts of the Internet ecosystem.

'Net Neutrality' is a very heated and contested United States policy principle regarding access for content providers to the Internet end-user, and potential discrimination in that access where the end-user's ISP (or another ISP) blocks that access in part or whole. The suggestion is that the problem can be resolved by either introducing greater competition, as for instance in certain Western European nations under the Telecoms Framework 2002 (as proposed for amendment 2007), or closely policing conditions for vertically integrated service, such as VOIP. This assumes that competition in the 'local loop' or 'last mile' to the end-user subscriber provides a choice of platform, and therefore rigorous telecoms competition regulation resolves the issue in Europe. However, that may not be the whole story. The question this paper aims to answer is: Are Internet Service Providers motivated to require content providers to pay for superior service via lower levels of service for the same price (e.g. blocking or 'throttling' content) or higher price for higher Quality of Service? Can abusive discrimination take place even where an ISP does not have dominance? I consider market developments and policy responses in Europe and the United States, conclusions and regulatory recommendations.

2011

Abstract Hahn and Wallsten (Econ. Voice 3 (6): 1–7, 2006) wrote that network neutrality “usually means that broadband service providers charge consumers only once for Internet access, do not favor one content provider over another, and do not charge content providers for sending information over broadband lines to end users.” In this paper we study the implications of non-neutral behaviors under a simple model of linear demand-response to usage-based prices.

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.