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Don't let the government slow Internet progress The Internet has become a powerful communications and economic force because it has been free from government interference. To make sure the power and promise of the Internet continues, we need to keep it free of government interference.
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Latest from the IFC Net Neutrality 101 Thursday, October 18, 2007 Jason Wright Have you been carefully following the network neutrality debate? Do you completely understand how the recent discussions regarding the auction of bandwidth in the 700Mhz range might nudge net neutrality one way or the other? Probably not, and that’s the way some folks want it. The net neutrality argument boils down to this: Some content providers (Google, Amazon, Yahoo, et al) are lobbying congress and the Federal Communications Commission (FCC) to pass laws and/or regulations that would prevent service providers (AT&T, Comcast, et al) from offering guaranteed “fast lane” for Internet traffic for some content providers and end users, presumably at the expense of others. There are complicating details, but that’s the issue at its core. Notice the words ‘providers’ and ‘lobbying’. This fight is between businesses with the Government acting as a not-so-impartial referee. The content providers want the rules of the marketplace to favor them. As long as all Internet traffic loads and destinations are treated equally, the burden to provide acceptable speeds for end users would fall on the service providers. Content providers get to ride for free. Service providers want the rules to stay the way they are – market forces with existing anti-trust law -- so that they retain the flexibility to react to a rapidly changing market. If that means charging customers (you) or content providers (YouTube) a few extra dollars to guarantee a smooth video experience, they want to have the option to do that. They argue that competition and existing laws are enough to prevent anti-competitive behavior. Each side has enlisted an army of believers. On the Google and Amazon and eBay side are the folks who think that the Internet is a publicly owned utility, and laws are needed to keep it “free” from market forces they might not like. Evil communications companies, they argue, want to impose restrictions, block web sites, or charge content providers extra if they want speedy connectivity. These activists tend to be very vocal and treat net neutrality as a social cause. On the other side are people who believe that free markets, not government agencies, are the best way to govern scarce resources – here, Internet bandwidth. “Why fix something that isn’t broken?” they ask. They also point out that many other network industries charge different rates for different levels of service. Why shouldn’t Internet service providers be allowed to do the same, within reason? For nearly five years, net neutrality advocates have painted scary pictures of what service providers might or could do if Government doesn’t act soon to stop them. Most scenarios involve some combination of blocked sites, deliberately degraded services, and attempts to control lawful content. Since many Internet activists are also net neutrality advocates, there is no shortage of blogging and email campaigns that offer rather extreme scenarios of what the future might hold in a world without legislation or regulation. What we don’t hear as much about are potential unintended consequences of a net neutrality regulatory regime. Imagine, for instance, a scenario where a telephone company wants to offer its Internet subscribers access to movie downloads. To ensure that customers are guaranteed that films provided by the movie download companies start immediately and run smoothly without interruption, the phone company may charge the movie-download company for that large, guaranteed, uninterrupted stream of bandwidth. The downside would be that the movie downloads would cost a little more. But the upside is that subscribers would have instant access to nearly every movie ever made any time they wanted to watch. Markets are ideally suited to manage these tradeoffs between supply and demand. But what if the government were in charge of these decisions? Net neutrality regulations would make it impossible to offer such a guaranteed movie-download service. Instead, someone who wanted to watch a movie would have to compete with the bandwidth demands of every other subscriber on the network. They could not get guaranteed service from the movie site even if they or the movie site were willing to pay for it. On top of that, the cost of building a network big enough to handle the peaks of traffic forced by a government enforced “neutral” Internet would fall completely on end users. There would be little incentive for content providers to pitch in because their contribution would guarantee them nothing. Now imagine that the laws don’t change and the movie scenario actually plays out but the phone company gets a little more aggressive and actively limits or even blocks access to competing movie sites. It becomes difficult to watch a movie anywhere but at the site of the phone company’s business partner. That doesn’t sound fair, does it? Well, turns out that it isn’t fair, and in fact it is already illegal. There is already a large body of anti-trust laws and regulations managed by the Federal Trade Commission aimed precisely at these sorts of issues. They need not be reinvented for commerce on the Internet. Even if a few companies do discover practices that are judged to be legal but which harm them or Internet end users, wouldn’t it make more sense to make new laws or rules after it is clear exactly what – if anything - needs to be fixed? Politicians and bureaucrats have a bad enough record when it comes to writing laws and rules aimed directly at specific, obvious problems. Do we really trust them to write something that corrects merely theoretical bad behavior? If a salesman came to your door offering to fix a problem with your house that they say might go wrong in the future, wouldn’t you be more than a little skeptical? It’s probably a good idea to watch for problems, but not to buy into a potentially very expensive cure for a problem that, despite the dire warnings of some political salesmen, has shown no signs of developing for nearly five years. Labels: net neutrality 10/18/2007 04:56:00 PMNet Neutrality: Where's the Beef? Monday, October 8, 2007 Jerry Brito and Jerry Ellig TCS Daily The Federal Communications Commission recently asked for evidence that broadband Internet companies currently engage in data discrimination that would justify regulation of the Internet. Thousands of filings flowed into the FCC, but when the flurry of paper shuffling settled, not one shred of evidence could be found. In its recent "Notice of Inquiry," the Commission explicitly asked commenters to "provide specific, verifiable examples with supporting documentation, and [to] limit their comments to those practices that are technically feasible today." Close to 10,000 comments were submitted to the FCC, yet all but 143 were what the FCC calls "brief text comments," many of which were form letters generated at the behest of advocacy groups. Of the 143 more extensive comments, only 66 are longer than two pages, and of these only 20 advocate some form of new regulation. None of these 20 offers any significant empirical evidence to suggest that there currently exists a "market failure" or other systemic problem justifying regulatory intervention in the name of net neutrality. In general, "net neutrality" means that Internet service providers have to treat all data "packets" exactly the same. All those e-mails, e-Bay auction offers, and pet hamster videos sent over the Net get broken down into pieces called "packets" before they're transported. Traditionally, Internet service providers transported data packets on a "best efforts" basis, with no particular packets receiving priority treatment. But Internet service providers can block, slow, or charge differently for different content if they treat different packets differently. Such discrimination can help or harm consumers, depending on the circumstances. Antitrust and consumer protection laws already prohibit practices that would most clearly thwart competition or shaft consumers. The FCC has also adopted a nonbinding "Internet Policy Statement" that puts companies on notice about specific practices that might trigger further regulation. The FCC has not yet decided what to make of the underwhelming evidence it received, but the Federal Trade Commission has. The FTC recently released a staff report summarizing the results of a two-day workshop, as well as research conducted by the commission's Broadband Task Force. The FTC staff concluded that there is little evidence of actual anticompetitive conduct by broadband providers: "[T]here is little evidence to date of consumer harm from anticompetitive practices by ISPs or any other network operators; the allegations of anticompetitive conduct focus mainly on effects that may occur if certain actions, such as exclusive agreements or vertical integration, are undertaken in the future." The FTC staff urged caution in adopting new regulation: "The primary reason for caution is simply that we do not know what the net effects of potential conduct by broadband providers will be on all consumers, including, among other things, the prices that consumers may pay for Internet access, the quality of Internet access and other services that will be offered, and the choices of content and applications that may be available to consumers in the marketplace." One might think this lack of evidence would effectively end the net neutrality debate. But not in Washington. While no one has proved that network owners engage in discrimination that harms consumers, many parties have argued that such discrimination is possible. That's enough to keep the debate rolling. And sometimes, the argument that "bad things might happen" is even enough to trigger new regulation. The FCC's inquiry has unearthed the same lack of evidence as the FTC's research. Nevertheless, the FCC is rumored to be considering an order that would impose "net neutrality" rules on a chunk of spectrum that will be auctioned for wireless services later this year. Preventive regulation is sometimes justified. If network owners are very likely to adopt business practices that clearly harm consumers, then some new regulation may be prudent. But common sense suggests that regulation's proponents should prove that anti-consumer discrimination is highly likely, not just possible. As the FTC staff noted, "The potential for anticompetitive harm exists in the various Internet-related markets, as it does in all markets." The mere possibility of harm, however, does not mean that new regulation is prudent or necessary. Sensible and effective regulation focuses on business practices that clearly harm consumers and are clearly likely to occur. Discrimination by broadband companies may be such a problem - but thus far, two federal agencies have found little evidence that's true. Dr. Ellig is acting director of the Mercatus Center's Regulatory Studies Program and has previously served as deputy director and acting director of the Office of Policy Planning at the Federal Trade Commission. Jerry Brito is a senior research fellow at the Mercatus Center at George Mason University.and studies telecommunications regulation, intellectual property, and cyberlaw at the Mercatus Center. Labels: net neutrality 10/08/2007 01:47:00 PMPrevious Posts: Top News
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