Thursday, April 6, 2006 - The Progress & Freedom Foundation Blog

New Neutrality Proposals: Ask Me No Questions, Tell Me No . . .

Thoughtful policymaking requires, at a minimum, that participants offer concrete proposals for effecting their bright ideas. It is primarily in that spirit that this week's proposal to graft a network neutrality mandate onto the Communications Act can be commended [TRDaily subscription required]. The proposal also draws favor to the extent it acknowledges that consumers benefit not only from substantial flexibility in how they use Internet content, applications and devices, but also from escalating broadband transmission speeds and capabilities.

Beyond that, however, this latest attempt to regulate broadband providers -- for acts they might commit in the future, that might undermine consumer welfare and that might not be disciplined by market forces -- demonstrates the difficulty of turning bright ideas about how the Internet should evolve into legislative directives that answer more questions than they raise. And, indeed, proponents of network neutrality mandates should worry that consumers will raise questions.

Most troubling is the proposal's apparent failure to specify a concrete mechanism for increasing broadband transmission speeds -- a purported goal. Building or retrofitting networks for higher data speeds can take tens of billions of dollars, as cable, telephone and, increasingly, wireless and other companies have demonstrated. Moreover, investors remain skittish that these outlays will earn a meaningful return, owing both to the prospects for competition and the real risk that regulation will increase costs and uncertainties faced by broadband providers. (In this sense, this week's rejection of pro-neutrality amendments to a bill under review elsewhere in Congress should not entice opponents of broadband regulation to premature celebration. This debate is far from over.)

Given these conditions, one might have expected this week's proposal to signal, at least, that there may be downsides to imposing network neutrality obligations at this time. Instead, the proposal opens a Pandora's Box of well-meaning exceptions to a strict nondiscrimination duty (e.g., letting networks prevent congestion or spam). By the time regulators finished carving out exceptions for all of the ways in which nondiscrimination could harm consumers, they could easily find themselves trying to administer something as Byzantine as, well, the largely defunct Computer Inquiry rules.

The proposal's complaint process risks overburdening broadband providers in another way; the persistently murky definitions of network neutrality will provide fertile compost for proponents to grow weeds of unnecessary litigation before the FCC or the courts. If broadband providers' decisions can be second-guessed constantly under the proposal, any claim these companies would be managing their own networks is rather hollow.

Also troubling is the proposal's apparent prohibition on networks charging unaffiliated content and applications companies when they obtain the same quality of service enjoyed by the network owners' affiliates. Leave aside that allowing networks to charge non-affiliates what they charge affiliates would be "nondiscriminatory," the overarching purpose of neutrality mandates. Leave aside, as well, the fact that keeping companies from charging for any service smacks of an unconstitutional "taking" of property without just compensation. The prohibition on charges for quality of service likely would delay the availability of such enhancements, thereby denying consumers the benefits of broadband Internet access that better supports the sophisticated content and applications they crave.

Unless, of course, consumers have to pay for network enhancements through increases in their subscription fees . . .

This last point reveals starkly what proponents of neutrality mandates are really after: they want to ensure that consumers -- rather than the large content and applications companies that support mandates -- pay for network improvements. Even if one has no sympathy for broadband network owners, it is simply unfathomable that they alone can bear these additional costs given the current investment and competitive environment.

If the companies favoring network neutrality mandates lose this debate, they also will lose the opportunity to sacrifice consumers on the altar of higher monthly broadband bills -- all so these increasingly profitable companies can keep their own costs a bit lower. That is precisely why this debate is far from over, and why content and applications companies should hope consumers never ask who gets to pay for network neutrality.

posted by Kyle Dixon @ 6:54 PM | Broadband , Cable , Capitol Hill , Communications , Innovation , Internet , Net Neutrality , The FCC , VoIP , Wireless , Wireline