Net neutrality: To control or not control, that is the question

15 Nov Net neutrality: To control or not control, that is the question

As the 2007 political season takes shape, the issue of “Net Neutrality” will likely surface at the federal level. Democrats now control both houses, and by all indications, U.S. Reps. John Dingell, D-Michigan, and Edward Markey, D-Massachusetts, will bring this hotly contested issue to the 2007 legislative agenda.
Even Rep. Nancy Pelosi, D-California, the anticipated Speaker of the House, has weighed in that something needs to be done. The multi-billion dollar question is: What should (or shouldn’t) be done? Or, to embellish Shakespeare a bit, “ To control or not control, that is the question.”
When policymakers gather in committee to address net neutrality, they will certainly be besieged by lobbyists and media blitzes. In the first six months of 2006, companies on all sides of the issue spent $51 million on lobbyists and $61 million on media buys. That’s almost $20 million a month. By this measure, net neutrality must be important.
Net neutrality is a term that describes regulatory schemes designed to regulate telephone and cable companies’ ability to manipulate, prioritize, or block Internet traffic across their access networks. There is no question that such technology provides significant market power to the telephone and cable companies. The concern of content providers and consumers is that cable and telephone companies will charge fees for Internet access to specific sites, determine what customers can view, and impact the customer experience through selective rate shaping and/or blocking web traffic altogether.
These are legitimate concerns of any company conducting business over the web and certainly that of members of the Information Technology Association of Wisconsin. There is a natural desire to regulate.
Yet the benefits of a policy of minimal government regulation have proven themselves worthy of continued consideration, and we should not assume market abuses will happen because they may happen. The Internet and IP are rapidly becoming the defacto standard for most communication. What began as e-mail has rapidly morphed to carrying not only text and data but voice, video, software services, gaming, and entertainment.
Morphing cycle
The morphing process and increasing capabilities of content sites have been directly tied to the deployment of fiber optic broadband access networks by cable and telephone companies. Like computer processors, higher broadband speed begets more capability at the content site, which begets more products and services that demand more broadband capacity.
The trajectory of this cycle and the velocity of change have been nothing short of phenomenal. BitTorrent traffic, for example, went from 0 to 18 percent of the Internet traffic in less than four years. The fact that Google, Yahoo, Amazon, eBay, MySpace, YouTube, Napster, and BitTorrent exist at all and were virtually unheard of five to seven years ago speaks volumes to the innovation that can occur when healthy competition prevails in an environment of rapid technological advancement, huge investments, and minimal governmental intervention.
In the 1990s, regulators tried to create competition in the access markets by unbundling network elements of the telephone companies. They failed, but while they were focused on regulatory schemes around unbundled network elements, cable companies found they could compete directly with telephone companies using the excess capacity on their hybrid fiber coaxial networks built to provide digital channels to their video customers.
Almost by accident, we now have a duopoly serving the access markets, with cable and telephone companies directly competing with each other. Effective competition started in 2005 and is now in full swing. Billions are at stake. Verizon alone is investing more than $23 billion in constructing its fiber directly to the home with 100 megabits per second capability to carry voice, data, and video to compete with cable. From a public policy perspective, these changes are staggering and positive. The cable/telco duopoly is a public policy home run. It is the goose that has laid the golden egg.
Goosing broadband
So how should our legislature deal with the net neutrality? Carefully. If we feel compelled to legislate, let’s not kill the goose but rather nurture it by providing incentives for faster broadband deployment in rural and depressed urban areas and for removing franchise and rights-of-way barriers that hinder construction of fiber optic networks.
We must remember that these networks are expensive to build and revenues are required to pay investors and operating costs. We must allow the telephone and cable companies to seek creative ways with content providers and customers to generate the necessary revenues to pay for the networks while delivering the highest value to their customers.
Abuses of market power can be dealt with when they occur. Allowing rigorous competition between cable and telephone companies to proceed unfettered will likely deliver faster penetration of broadband to consumers, greater speeds, and more uses at the lowest cost than we can possibly imagine under a regulated environment.
Control or not control? Find me a goose that likes living in a pen.
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