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Saturday, August 14, 2010

 
Net Neutrality, Banned Business Models & Price Controls
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I continue to be mystified by the contention of some Net neutrality advocates that it is not a form of economic regulation. The reality, of course, is that Net neutrality would ban business models and necessitate price controls. If that ain't regulation, I don't know what is. As Robert Litan and Hal Singer note in their new Harvard Business Review essay, "Why Business Should Oppose Net Neutrality," "Non-discrimination under the FCC's net neutrality proposal means that ISPs cannot offer enhanced services beyond the plain-vanilla access service to content providers at any price." Thus, any type of service prioritization or price discrimination would be prohibited under the FCC's Net neutrality regulatory regime.

As I explained in this earlier essay and in the video below, this would be a disaster for investment, innovation, and consumer welfare. Differentiated and prioritized services and pricing are part of almost every industrial sector in a capitalistic economy, and there's no reason things should it be any different for broadband. As Litan and Singer note, "The concept of premium services and upgrades should be second-nature to businesses. From next-day delivery of packages to airport lounges, businesses value the option of upgrading when necessary. That one customer chooses to purchase the upgrade while the next opts out would never be considered 'discriminatory.'"

And let's not forget, something has to pay for Internet access and investment in new facilities. Differentiated services can help by allowing carriers to price more intensive or specialized users and uses to ensure that carriers don't have to hit everyone - including average household users - with the same bill for service. Why would we want to make that illegal through Net neutrality regulation and the misguided price control schemes of a bygone regulatory era?

posted by Adam Thierer @ 2:30 PM | Economics , Net Neutrality

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Comments

Thanks for explaining aboutnet neutrality

Posted by: Anthony at November 1, 2010 10:07 AM

Paying a premium for anything is bad! I especialy hate premium rate telephone numbers. That is why I have set up a website to combat these highly over-priced numbers.

Check out the website about Alternatives to premium rate numbers (0900-numbers).

Posted by: Alexander van Dijl at November 4, 2010 7:32 PM

You just to make sure you take everything into account when you calculate ROI

Posted by: Abbasi at November 19, 2010 4:15 AM

Just have to make sure you take everything into account to estimate your ROI

Posted by: Abbasi at November 19, 2010 4:16 AM

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