Net Neutrality Rules Depress Investment, Reduce Competition

Net Neutrality Rules Depress Investment, Reduce Competition

October 22, 2009

Washington, D.C., October 22, 2009 – Today the Federal Communications Commission (FCC) voted to issue a Notice of Proposed Rulemaking that would put government, rather than consumers and competing enterprises, at the helm of the Internet’s future.  FCC Commissioners contemplate this action with no authority from Congress.

Federal agencies should not dictate business models or discriminate against infrastructure providers, argues Wayne Crews, CEI Vice President for Policy:

· Agency neutrality, not net neutrality, is the real key to Internet freedom. If the administration actually valued neutrality, it wouldn’t pick favorites by discriminating against the infrastructure industry. The FCC’s proposed rules are the true non-neutrality and discrimination at issue today. The FCC should steadfastly resist politically driven business and pressure group demands for special treatment of particular elements of the communications sector.

· Neutrality rules are hostile to emerging networks. The FCC’s willingness to erect barriers to the creation of infrastructure wealth suggests a disdain for future consumer welfare in the digital economy and for genuinely liberalized communications markets. Why isn’t the FCC leading the charge to expand the scope of competing network models, open and proprietary?

· CEOs that wrote the FCC in favor of rulemaking will rue the day. Content firms’ own escalating market power renders them vulnerable to the same political predation they’ve unleashed on the infrastructure industry. In a world of net neutrality, one could just as credibly—or perversely—make a case for “Search Neutrality” or “Video Neutrality.”

Openness mandates constrain innovation at the core and limit broadband availability, argues Ryan Radia, CEI Information Policy Analyst:

· Competing Internet providers shouldn’t have to get permission from the FCC to manage their networks. No number of “brilliant engineers” can formulate a single universal framework for distinguishing between reasonable and unreasonable network management. This knowledge is dispersed across millions of participants in the online ecosystem. Decentralized experimentation – trial and error – is best able to synthesize varying consumer preferences and economic interests. Empowering government to dictate network management would make the Internet vulnerable to political manipulation and enable narrow fringe constituencies to wield destructive power over private networks.

· Neutrality rules are fundamentally irreconcilable with the National Broadband Plan. Congress has tasked the FCC with developing a plan to efficiently make broadband available across America. But neutrality mandates depress investment and make it harder for network operators to offer affordable Internet service. Openness is just one of many aspects of Internet service, which include affordability, speed, and reliability. Placing “neutrality” on a pedestal above other competing values makes broadband less affordable and available.

· The FCC itself is to blame for insufficient broadband competition. For decades the FCC embraced supposedly pro-consumer regulation that resulted in a severely distorted market for Internet service. Giant chunks of radio spectrum that could be used to deliver Internet access to consumers remain tied up due to legacy rules. Aggressive liberalization of the airwaves will be essential to promoting consumer welfare and stimulating broadband competition.

For more telecom policy analysis, visit http://cei.org/issue/2.

To contact CEI's technology team, please email rradia@cei.org.

The Competitive Enterprise Institute is a 501(c)(3) nonprofit, nonpartisan public interest organization that studies the intersection of risk, regulation, and markets.