Economics of Net Neutrality, The: Why the Physical Layer of the Internet Should Not Be Regulated

Networks, the Internet, and Cloud Computing, Networks and Infrastructure and Net Neutrality

Article Snapshot


Christopher Yoo


The Progress and Freedom Foundation Progress on Point 11.11, 2004


The paper asks if network neutrality rules would help or harm consumers.

Policy Relevance

Network neutrality rules could harm consumers and services that use a 'fast lane,' and reduce competition. Requiring carriers to share their networks discourages investment.

Main Points

  • “Network neutrality” proposals would restrict ISP’s from charging more for “fast lane” service or controlling content online, to stop broadband carriers from targeting content providers or rival carriers who use the broadband carriers’ networks.

  • Competition in online content and Internet service is healthy; broadband carriers that also offer content or Internet service cannot control those markets.

  • Consumers are best off when network owners are free to offer a variety of services and control costs. Institutional and mass-market users and applications providers do not all need the same type of service. Demand shifts over time.

  • Competition among networks serving the “last mile” to users’ homes is fragile. Letting niche networks offer exclusive content or “fast lane” service will help keep this area from becoming a natural monopoly.
    • Clear property rights in networks provides a measure of certainty to investors and encourages building new networks.
    • Broadband carriers’ rivals like Google will support new wireless, 3G/4G, or other broadband alternatives if they cannot piggyback on old ones.

  • Net neutrality rules would hinder innovation at the core of the network. Technologists recognize that having smart technology at the end of the network makes sense sometimes, but not always.

  • The “connectivity principles” backed by the High Tech Broadband Coalition and the Coalition of Broadband Users and Innovators would hinder carriers in dealing with network congestion. Some users and applications give rise to security problems.

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