ABI Technology & Intellectual Property Committee Newsletter

ABI Committee News

Why Net Neutrality Is Unnecessary and Bad Policy

Internet special interests like Google, eBay, Amazon and Moveon.org are lobbying hard for new utility-like regulation of broadband competitors called “net neutrality.” Fearing hypothetical discrimination, net neutrality regulation proponents want government to preemptively mandate a one-tier Internet where all Internet traffic would be treated equally. Proponents claim that net neutrality would protect free speech as the “First Amendment of the Internet,” even though the Internet has no constitution to amend and the term “net neutrality” emerged in 2002—more than three decades after the Internet’s inception.

Opponents of net neutrality support current U.S. policy that maintains a “free market…Internet…unfettered by Federal or State regulation.” They oppose net neutrality regulation as a “solution in search of a problem.” All of the alleged “problems” of Internet discrimination have legitimate consumer protection explanations. Overall, net neutrality regulation is not a mainstream issue, and politically, it is not sound Democratic or Republican public policy.

A Fringe Issue and a Factional Business Dispute

Net neutrality is an attempt to legislate Internet network design. Columbia Law Professor Tim Wu, the advocate who coined the term “net neutrality,” said it “is best defined as a network design principle.” Why would Congress want to pass a permanent law that freezes in place a 30-year-old network design and effectively forecloses future network design innovation and the emergence of a new next-generation Internet? Technically, net neutrality is about whether the government dictates that broadband networks must be “neutral” or “dumb” with “intelligence” limited to the network edge, or allows networks to be “smart” with “intelligence” included in the network. This network design debate has greatly divided Silicon Valley interests. Cisco states: “Innovation inside the network is just as important as innovation in services and devices connected to the Internet.” Google and eBay have the exact opposite view and seek new network neutrality regulations that proactively favor their “edge” innovation in services and devices. Not surprisingly, this network design dispute also divides online and broadband business interests. Online business interests believe Internet consumers should shoulder the cost of maintaining and upgrading the Internet, while broadband interests believe online producers should help consumers shoulder the cost of maintaining and upgrading the Internet.

Not Sound Democratic Policy

First, a neutral or “one-tier” Internet would be highly-regressive because lower-income, low-bandwidth consumers would be forced to subsidize the spiraling costs caused by the highest-bandwidth users and the most-profitable online companies, such as Google. Generally, net neutrality proponents oppose charging those who use the most bandwidth the highest fees, believing that averaging the costs among all users somehow encourages innovation at the edge of the network. Second, a neutral Internet would disallow “prioritization” of traffic for key Democratic priorities like emphasizing: public safety, first responders, the disabled community, schools, libraries, telemedicine and rural/underserved areas. Third, net neutrality would slow universal broadband adoption. Internet regulation of access prices, terms and conditions would discourage necessary infrastructure investment and destroy incentives to rapidly deploy broadband to all Americans, especially in rural and underserved areas. Finally, net neutrality is essentially corporate welfare for dot.com billionaires. Online companies Google, eBay and Amazon, which use the most bandwidth and benefit the most from the Internet, would pay the least under a neutral one-tier Internet. Consumers would increasingly need to subsidize the spiraling usage of online companies who already enjoy 80-90% gross margins.

Not Sound Republican Policy

First, the Internet is the greatest deregulation and free-market success story of all time. With virtually no justification, net neutrality proponents seek to reverse long-standing bipartisan congressional policy: “to preserve the vibrant and competitive free market that presently exists for the Internet…unfettered by Federal or State regulation.” Based on virtually no evidence or policy review, net neutrality proponents seek to also reverse the successful competition purpose of the 1996 Telecom Act “to promote competition and reduce regulation…to encourage the rapid deployment of telecommunications technologies.” House Internet Subcommittee Chairman Ed Markey’s pending “Internet Freedom Preservation Act,” H.R. 5353, would subordinate current congressional priorities for promoting competition, deregulation, new technologies and universal service to a new “open networks” requirement that would effectively regulate broadband providers’ network management and innovation. Second, net neutrality is simply a revival of failed 1970s industrial policy. Net neutrality would have government second-guess markets and consumers in determining market winners and losers; demand for new products and services, and deciding which innovations and standards would be encouraged or disallowed. Net neutrality proponents apparently trust government as all-seeing and all-knowing.

In short, net neutrality is a radical and myopic policy agenda to create a socialized Internet with no concern for the inevitable unintended consequences. Why risk worsening the recession or slowing job creation by regulating a healthy part of the economy that doesn’t need regulation? Why discourage broadband deployment to all Americans by freezing broadband investment critical to building the needed new capacity to handle Internet video? Why impede progress toward a more green broadband economy by discouraging the positive trend toward more broadband telecommuting? In a word, if it’s not broke, don’t fix it!

· Winners if no net neutrality regulation: consumers; telecom, wireless and cable broadband companies; CLECs; content companies and Internet and network equipment companies. 

· Losers if no net neutrality regulation: Google, eBay, Amazon, IAC/Ask.com and Moveon.org.