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Thursday, March 29, 2007

Economists' Statement on Net Neutrality
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I recently joined 15 other economists to sign a statement explaining how proposed net neutrality regulations were likely to do more harm than good. Some of the luminaries who signed include Professors William Baumol, Alfred Kahn, Vernon Smith, and other distinguished folks.

To be sure, some economists find merit in net neutrality, but most recognize that our history with price and other regulations in telecommunications is a sorry one that has largely hindered competition and harmed consumers. Given this history and the rapid pace of change in the industry, new market structure and price regulations seem like a poor public policy choice.

posted by Scott Wallsten @ 9:47 AM | Net Neutrality

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Here’s an interesting example of how the principles of Net Neutrality can be linked back to the Internet’s older brother, the telecom network. A few weeks ago, AT&T began blocking calls to services like FreeConferenceCall.com. AT&T did this without filing a direct lawsuit, without petitioning the FCC and without even contacting Free Conferencing Corp, the parent company. These types of free services are completely legal and AT&T is using self-help and cowboy justice to financially bully competing services out of business. You can learn more at blog.freeconferencecall.com.

Posted by: Noelle Resare at March 29, 2007 7:14 PM

I am not at all clear on the legal process that is appropriate for AT&T and FreeConference to follow. However, it is clear that the FreeConference business model is simply a result of regualtory arbitrage. Because of the combination of overpriced terminating access and Section 254(g) of the telecom Act that mandates geographic rate averaging, AT&T cannot pass along the higher costs to the customers who are calling these numbers. It MIGHT have some possible rationale to provide service for rual customers (although even this is highly doubtful) but to provide people like me with free conference calling and a profit for the company at the expense of long distance providers could not have been the intent of these provisions.

Bottom line is that somehow this situation should be changed, and it should not be preventing AT&T from blocking calls without allowing AT&T to charge a higher price to call these numbers.

Posted by: Greg Rosston at March 30, 2007 6:20 PM

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