Friday, April 6, 2012
Posted by D. Daniel Sokol
Gerald Faulhaber (Wharton) describes “Solving” Net Neutrality: Regulation, Antitrust, Or More Competition.
ABSTRACT: Since net neutrality first appeared in policy debates, its meaning has been less than crystal clear. Some advocates have argued that net neutrality demands that broadband internet service providers ("ISPs") treat all bits equally: "a bit is a bit is a bit," while others make exceptions for malware bits, spam bits, child porn bits, etc. Some advocates have argued that net neutrality must apply not only to wired broadband ISPs (cable, DSL, and fiber) but to wireless broadband providers as well, while others recognize that wireless broadband has a unique technological structure that requires more stringent and flexible capacity management than is consistent with "a bit is a bit is a bit."
Whatever its definition, both the form and substance of the public policy response have been subject to much debate. Some have argued that the problem is one of market structure: the U.S.'s duopoly in wired broadband ISP services requires public control to protect the open internet that would not be needed in a competitive market. Others have argued that some form of public control is required no matter what the market structure. The outcome of this discussion informs the choice of public policy instrument: Should this be a problem addressed via regulation or should it be addressed via antitrust?
The Federal Communications Commission ("FCC") has issued a Report and Order ("R&O") promulgating its network neutrality rules, which, as might be expected, strikes a middle ground between purists on each side of the debate. Curiously, the FCC itself seems to have foresworn the use of the term "network neutrality," preferring to adopt phrases such as "preserving the Open Internet," or Open Internet rules." In this paper, I continue to use the traditional terminology.
First I outline the FCC's recently enacted regulation on network neutrality and then I ask three questions:
What economic problem is net neutrality designed to solve? What is the empirical evidence concerning this problem? What is the EU doing, if anything, on net neutrality? What is the more effective instrument for implementing net neutrality: regulation or antitrust?