“Net Neutrality”: Digital Discrimination or Regulatory Gamesmanship in Cyberspace?

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A heated dispute erupted in late 2002 betweencorporate giants in the high-tech sector over howthe networks owned by cable and telecom companieswill be governed in the future. Several majorsoftware and e-commerce firms have formed theCoalition of Broadband Users and Innovators topetition the Federal Communications Commissionto adopt rules ensuring that cable and telephoneindustry broadband operators will not usetheir control of high-speed networks to disruptconsumer access to websites or other users. In thename of preserving "network neutrality" andInternet "openness," CBUI members argue thatthe FCC must adopt preemptive "nondiscriminationsafeguards" to ensure Net users open andunfettered access to online content and services inthe future. CBUI claims such preemptive, prophylacticregulation is necessary because the currentmarket is characterized by a cable-telco "broadbandduopoly" that threatens Internet users.

Such rhetoric and calls for preemptive regulationare unjustified. There is no evidence thatbroadband operators are unfairly blocking accessto websites or online services today, and there is noreason to expect them to do so in the future. Nofirm or industry has any sort of "bottleneck control"over or market power in the broadband marketplace;it is very much a competitive free-for-all,and no one has any idea what the future marketwill look like with so many new technologies andoperators entering the picture. In the absence ofclear harm, government typically doesn't regulatein a preemptive, prophylactic fashion as CBUImembers are requesting.

Moreover, far from being something regulatorsshould forbid, vertical integration of newfeatures and services by broadband networkoperators is an essential part of the innovationstrategy companies will need to use to competeand offer customers the services they demand.Network operators also have property rights intheir systems that need to be acknowledged andhonored. Net neutrality mandates would floutthose property rights and reject freedom of contractin this marketplace.

The regulatory regime envisioned by Net neutralitymandates would also open the door to agreat deal of potential "gaming" of the regulatorysystem and allow firms to use the regulatorysystem to hobble competitors. Worse yet, itwould encourage more FCC regulation of theInternet and broadband markets in general.

Adam D. Thierer

Adam D. Thierer is director of telecommunications studies at the Cato Institute and coauthor, with Clyde Wayne Crews Jr., of What's Yours Is Mine: Open Access and the Rise of Infrastructure Socialism (Cato Institute, 2003).