The Unnecessariness of Net Neutrality Regulations

by on November 25, 2009 · 17 comments

My PFF colleague Barbara Esbin has a great piece about why “FCC Could Mess Up Internet With ‘Net Neutrality’ Rules No One Needs” in a USNews point/counterpoint debate with  Andrew Schwartzman of the Media Attack Access Project, who claims such rules “Would Keep the Web Free for Speech and Trade.” Here are her two best gems:

The FCC claims that broadband Internet markets are insufficiently competitive today to protect consumer interests. Yet a 2007 Federal Trade Commission report found no market failure and warned regulators to proceed with caution. The FCC acknowledges that broadband service providers face growing traffic volume demands that must be managed but claims that they have the potential—the opportunity, means, and motive—to act in an anticompetitive fashion when transporting Internet traffic across their networks. FCC detectives point to economic theory suggesting providers have incentives to act in an anticompetitive manner against competing providers of content, applications, or services. What is missing from this crime scene investigation is the body—the actual evidence that providers are behaving anticompetitively or are likely to.

And:

Lacking evidence that regulation is now necessary to combat either market failure or other consumer harms, the FCC is left to postulate a dystopian world without network neutrality rules. It claims that unless it acts now, we risk losing what we value most about the Internet. In other words, it creates what economists would call a “counterfactual.”

But we don’t need economic theory to tell us what a world without network neutrality rules would look like because we already live in that world. And in the real world, the fact is that the Internet ecosystem we have is functioning quite well to satisfy customer needs without the ministrations of the FCC. In fact, one might go so far as to say it functions as well as it does because of that.

Of course, regulatory advocates would insist that broadband providers aren’t really behaving themselves today, citing a handful of vastly exaggerated examples. But they would probably fall back on the argument that broadband service providers are just waiting to start behaving even more anti-competitively until the threat of net neutrality regulation has been removed.

It’s certainly true that government disciplines markets as much by the threat of regulation as the actual exercise thereof, but that’s especially true of antitrust laws: Even if we never see an antitrust suit brought against an ISP for anticompetitive behavior towards applications and content providers, antitrust laws would still play—indeed, have already played—a vital role in discouraging companies from engaging in the kind of behavior Andy Schwartzman worries about. That’s why PFF proposed relying on case-by-case antitrust enforcement rather than preemptive regulation with its 2005 DACA project.

Given the dangers of inviting further proscriptive government regulation of the Internet: “All we are saying, is give love antitrust a chance…”

  • giyim

    Thank you in advance for your quick answer !. Very nice post.

  • http://srynas.blogspot.com/ Steve R.

    Berin, you write “What is missing from this crime scene investigation is the body—the actual evidence that providers are behaving anticompetitively or are likely to. and “Of course, regulatory advocates would insist that broadband providers aren’t really behaving themselves today, citing a handful of vastly exaggerated examples..

    Seems to be a case of selective reality. Over at TechDirt there is steamroller “proof” that the evidence exists, is available for reference, and may show an accelerating trend. Australian Operator Optus Deliberately Blocking Android Paid Apps and Virgin Media Using Deep Packet Inspection To Spy On Your Internet Usage For Hollywood</a”; well beauty (reality) is in the eye of holder.

  • Ryan Radia

    I know of a handful (or at best a couple dozen) demonstrated instances of net neutrality violations having occurred over the years, but I haven't seen much data on how many subscribers have actually been impacted by these violations. We know Comcast was messing with Bittorrent seeding, but we don't know how many Comcast subscribers actually tried to seed a file and had trouble doing so on account of Sandvine.

    If one in ten thousand U.S. ISP subscribers have been directly impacted by non-neutral behavior, it is harder (though not necessarily impossible) to justify FCC regulation than if, say, one in ten have been impacted.

  • Ryan Radia

    Also, note that the behavior described in the second link you provided (Virgin Media Using Deep Packet Inspection To Spy On Your Internet Usage For Hollywood) likely would not constitute a net neutrality violation according to the rules proposed by the FCC. The rules contain an explicit exception for ISP discrimination against suspected illegal content such as copyright-infringing files.

  • http://srynas.blogspot.com/ Steve R.

    Very valid points. Regulation can't address all issues of abuse. It is also difficult, at times, to establish if certain behaviors are a legitimate activity to manage traffic or if the behavior is actually nefarious. My hope is that we can have policy analysis based on real introspection and not based on the viewpoint of a particular political mantra. Seems that the “global warming” policy mantra is now suffering from such a credibility meltdown. (I guess there is a pun in that!)

  • http://srynas.blogspot.com/ Steve R.

    Berin, you write “What is missing from this crime scene investigation is the body—the actual evidence that providers are behaving anticompetitively or are likely to. and “Of course, regulatory advocates would insist that broadband providers aren’t really behaving themselves today, citing a handful of vastly exaggerated examples..

    Seems to be a case of selective reality. Over at TechDirt there is steamroller “proof” that the evidence exists, is available for reference, and may show an accelerating trend. Australian Operator Optus Deliberately Blocking Android Paid Apps and Virgin Media Using Deep Packet Inspection To Spy On Your Internet Usage For Hollywood; well beauty (reality) is in the eye of holder.

  • Ryan Radia

    I know of a handful (or at best a couple dozen) demonstrated instances of net neutrality violations having occurred over the years, but I haven't seen much data on how many subscribers have actually been impacted by these violations. We know Comcast was messing with Bittorrent seeding, but we don't know how many Comcast subscribers actually tried to seed a file and had trouble doing so on account of Sandvine.

    If one in ten thousand U.S. ISP subscribers have been directly impacted by non-neutral behavior, it is harder (though not necessarily impossible) to justify FCC regulation than if, say, one in ten have been impacted.

  • Ryan Radia

    Also, note that the behavior described in the second link you provided (Virgin Media Using Deep Packet Inspection To Spy On Your Internet Usage For Hollywood) likely would not constitute a net neutrality violation according to the rules proposed by the FCC. The rules contain an explicit exception for ISP discrimination against suspected illegal content such as copyright-infringing files.

  • http://srynas.blogspot.com/ Steve R.

    Very valid points. Regulation can't address all issues of abuse. It is also difficult, at times, to establish if certain behaviors are a legitimate activity to manage traffic or if the behavior is actually nefarious. My hope is that we can have policy analysis based on real introspection and not based on the viewpoint of a particular political mantra. Seems that the “global warming” policy mantra is now suffering from such a credibility meltdown. (I guess there is a pun in that!)

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