Journal of Competition Law & Economics, Vol. 2, No. 3, pp. 349-474, September 2006
Analyzes the effects of proposed net neutrality regulation and finds little justification for such measures.
New net neutrality regulations have been proposed to prevent certain pricing and merger/acquisition strategies because some think that they discourage innovation by content providers.
The market for broadband access is competitive. Cable modem market shares are converging to 50 percent nationwide as DSL providers gain share, and broadband prices have fallen substantially.
Anecdotes of overt discrimination against content providers have become increasingly rare since 2002.
There is no evidence that, under the current regulatory structure, the market is producing too little innovation in content and applications.
Vertical integration (mergers between content providers and internet service providers) or contracting for priority delivery with content providers directly --prohibited under some proposed regulations-- would result in greater output of prioritized delivery at lower prices for end-users.
The potential for network operators to exploit their market power by restricting access to certain content are remote and if they do, the current regulatory framework is sufficient to handle it.
Prohibiting vertical integration by network operators is actually anti-competitive because it prevents them from competing with incumbent content providers. The benefits from competition caused by vertically integration “vastly exceed” the harm to incumbents.