Net Neutrality Looking Forward

By TAP Staff Blogger

Posted on February 6, 2011


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Everyone agrees that the Internet has become an important factor in economic growth and innovation. While providing a foundation for innovation, the physical and virtual networks that comprise the Internet have undergone a process of almost continual change. Policymakers continue to be challenged by the puzzle of how and whether to regulate the Internet, preserving its role as an engine of growth while still allowing it to evolve. The debate over net neutrality concerns whether legally enforceable rules are needed to keep the Internet “open” to innovation by end users, either individual consumers or firms like Amazon.com and Google. Some observers began to raise concerns over a decade ago that broadband network operators like Comcast or AT&T Wireless would block or degrade content carried over their networks. In December of 2010, the Federal Communications Commission (FCC) announced its Open Internet Order, the first detailed legally enforceable net neutrality rules. (For more basics on net neutrality, see TAP’s Net Neutrality Fact Sheet).

The Open Internet Order includes three basic rules:
  • Transparency: Broadband providers must disclose information about how they manage their networks. 

  • No Blocking: Broadband carriers must let users access lawful content, sites, applications, and devices, though some limit may be permitted for reasonable network management. Mobile carriers will have somewhat more leeway to impose restrictions. 

  • No Unreasonable Discrimination. “Discrimination” ordinarily would refer to charging different but similar customers different prices. The FCC’s comments suggest that deals where a customer pays more to have his traffic given priority, “pay for priority,” will violate this rule.

The rules are controversial, with some arguing that the rules do not go far enough to guarantee an open Internet, and others that the rules go too far or are unnecessary. Commissioner Baker’s dissent from the FCC’s order emphasizes that there is little evidence that such rules are needed and that the regulation will hurt job growth. Commissioner McDowell’s dissent makes similar arguments, and both dissenters argued that the FCC had overstepped its authority in adopting the new rules. Several legislators proposed bills that would overturn the FCC’s order, including the H.R. 96, the Internet Freedom Act.  In January of 2011, TAP scholar Christopher Yoo joined the Internet Caucus discussion entitled “2011 State of the Net Panel: Congress & the Open Internet Order: Discuss,” with other speakers to talk about possible Congressional responses.

On January 20, Verizon filed a Notice of Appeal of the FCC’s Open Internet Order in the D.C. Circuit Court of Appeals, as covered by Reuters, PC Magazine, and CNET.  The same day, Verizon filed a motion to request that the case be decided by the same panel of judges that decided FCC v. Comcast in April of 2010. In this case, the judges were unanimous in ruling that the FCC’s attempts to penalize Comcast for limiting subscribers’ peer-to-peer network traffic exceeded the FCC’s mandate from Congress. TAP scholar Dale Hatfield and other observers address the state of the FCC and proposals for reform at a conference in March of 2010, described here on TAP.

One of the key questions in the net neutrality debate is whether competition between broadband carriers is enough to keep the large carriers from trying to take advantage of other’s reliance on their networks. TAP scholar Nicholas Economides argues that competition between broadband carriers will not be enough to prevent harm to consumers from higher prices in his “Why We Need Net Neutrality” and at greater length in "’Net Neutrality,’ Non-Discrimination and Digital Distribution Through the Internet." Tim Wu’s new book “The Master Switch: The Rise and Fall of Information Empires” argues that, over time, communications networks will come to be controlled by monopolies. But Daniel Spulber and Christopher Yoo’s paper “Rethinking Broadband Internet Access” argues that broadband competition should be sufficient to make net neutrality rules unnecessary. TAP scholar Gregory Rosston and coauthor Michael Topper explore issues related to net neutrality and wireless in their paper “An Antitrust Analysis of the Case for Wireless Network Neutrality.” They examine the business practices of wireless broadband carriers. They conclude that while some of the carrier’s practices are controversial, they may actually help consumers. They also find that the wireless industry is competitive, but some regulatory changes would make it more so, lessening the need for net neutrality rules.

Experts also disagree on whether net neutrality rules are likely to harm consumers or reduce investment. Christopher Yoo takes the view that net neutrality rules could harm consumers in “Network Neutrality, Consumers, and Innovation.” Economists Robert Hahn and Scott Wallsten also argue, in “The Economics of Net Neutrality” that the rules probably would be harmful. Lawrence Lessig and Ben Scott outline potential benefits to consumers in "Public Must Fight to Maintain Net Neutrality." Tim Wu and Robin S. Lee’s paper “Subsidizing Creativity through Network Design: Zero-Pricing and Net Neutrality” argues that net neutrality rules would promote innovation by Internet users.  Jay Pil Choi and Byung-Cheol Kim’s "Net Neutrality and Investment Incentives" takes a moderate position, noting that net neutrality could encourage businesses that use the Internet as a platform, but could reduce investment in technology that uses a "fast lane."

TAP continues to follow the debate on this timely subject. Check back for updates on this issue, or use TAP's search with keywords, "net neutrality" to see additional articles and posts.

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