Why we need net neutrality

By Nicholas Economides

Posted on April 20, 2010


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The FCC should pass the non-discrimination rule, usually called “net neutrality.”


Without this rule (i.e., today) residential broadband access networks can arbitrarily charge fees to any of the billion or so users of the Internet. And, anyone who does not pay will be relegated to a slow Internet lane. This sounds so insane and diverging from the normal operation of the Internet, that I need to underline it and explain it.


Suppose you are a Comcast Internet customer in San Francisco. You pay your monthly Internet bill to Comcast, and you download and upload email, images, music, video, play interactive games, etc. But Comcast wants to start charging fees to anyone you interact with on the Internet. Anyone! What size fees? Any size Comcast decides. Does it want to be able to charge fees to its competitors in content, even high enough that Comcast subscribers do not receive that content? Absolutely. Competitors in VoIP? Sure. To those websites that do not conform to its beliefs? Of course. The list of possible discriminatory actions is endless …


Why would Comcast do it? Just because it is currently allowed, and it has sufficient monopoly power to profitably do it. Consider what would Microsoft do if Comcast threatened to put Bing in the slow lane unless it paid a (large) fee? The threat of substantial loss of customers would likely force Microsoft to pay the fee. And the same with a multitude of companies that participate on the Internet.


You might say, this is a blatant abuse of monopoly power by the broadband access networks , and yes it is. Of course, in their filings to the FCC, the telcos and cable companies claim they have no market power. However, it is a fact that residential customers typically face a duopoly in broadband access – a cable company and a telco – not much competition there. Residential customers also have significant switching costs in changing providers which add to the market power of the access networks. Additionally, if say Bing is put in the slow lane, customers will not know if the delay in their Bing search results is because of the access network or because of Microsoft – thus diminishing their incentive to potentially change access network. On top of it, all the major residential access networks say they want to discriminate, so to whom can the customer switch to avoid the delay from discrimination? And the fact that telcos and cable companies are trying so hard to kill non-discrimination makes it very clear: they have significant market power, and if the rule does not pass, they will start imposing these arbitrary fees as soon as the dust settles.


Finally, under non-discrimination, the Internet has been so amazingly successful and helped tremendously US growth. The FCC should codify the non-discrimination principle to preserve and enhance Internet’s success and significant contribution to US growth.

 


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