Friday, September 07, 2007

“Network Neutrality” Regulations Might Deter Investment in Internet, Limit Consumer Choice

This posting was written by John W. Arden.

Proposals for FCC regulations—offered by companies and organizations in the name of “net neutrality”—might deter broadband Internet providers from upgrading and expanding their networks to reach more Americans, according to a Department of Justice filing submitted in response to an FCC Notice of Inquiry regarding broadband practices.

The term “net neutrality” encompasses a variety of proposals that seek to regulate how broadband Internet providers transmit and deliver Internet traffic over their networks, the Department said.

Shifting of Costs

Proposals that preclude broadband providers from charging content and application providers directly for faster or more reliable service “could shift the entire burden of implementing costly network expansions and improvements onto consumers.” If the average consumer is unwilling or unable to pay more for broadband Internet access, the result could be to reduce or delay critical network expansion and improvement, the Department said in its filing.

It may make economic sense for content providers who want a higher quality of service to pay for the Internet upgrades necessary to provide such service, since any regulation that prohibits charging content and application providers “may leave broadband providers unable to raise the capital necessary to fund these investments.”

“Consumers and the economy are benefitting from the innovative and dynamic nature of the Internet,”said Thomas O. Barnett, Assistant Attorney General in charge of the Department’s Antitrust Division. “Regulators should be careful not to impose regulations that could limit consumer choice and investment in broadband facilities.”

Absence of Widespread Problems

Despite the FCC’s call for specific information on harmful broadband activities, the Department noted that comments filed in response to this Notice of Inquiry did not provide evidence that would suggest the existence of a widespread problem that needs to be addressed. In addition, there is no consensus on what “net neutrality” means or what should be prohibited in the name of “neutrality.”

“The FCC should be highly skeptical of calls to substitute special economic regulation of the Internet for free and open competition enforced by the antitrust laws,” the Department said in its filing. “Marketplace restrictions proposed by some proponents of ‘net neutrality’ could in fact prevent, rather than promote, optimal investment and innovation in the Internet, with significant negative effects for the economy and consumers.”

Internet Regulation v. Antitrust Enforcement

While cautioning against premature regulation of the Internet, the Department noted its authority to enforce the antitrust laws. “Anticompetitive conduct about which the proponents of regulation are concerned will remain subject to the antitrust laws and enforcement actions by government as well as private plaintiffs, and the Department will continue to monitor developments, taking enforcement action where appropriate to ensure a competitive broadband Internet access market,” the Department stated.

The Department of Justice’s ex parte filing and a news release are available from the Department of Justice on the Antitrust Division’s web site.

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