Policy Documents

Research & Commentary: Network Neutrality

October 30, 2013

A current court case has reignited the debate over net neutrality. Net neutrality is a set of federal rules requiring Internet service providers to allow equal access to all online content and applications regardless of the source. Providers may not favor or block any particular product, service, or Web site. Net neutrality has been controversial ever since it was first proposed.

In 2010, the Federal Communications Commission (FCC), which administers telecom rules and regulations, lost a legal battle with Comcast when the court decided the FCC did not have the authority to stop Comcast from slowing BitTorrent traffic on its network. The case currently before the DC Circuit Court involves a challenge by Verizon against the Open Internet framework, aka net neutrality. Verizon is arguing Open Internet is a burdensome regulation that makes it difficult to expand Internet services and their overall business.

The main legal issue before the court is the FCC’s authority to create and administer the Open Internet framework. In a Forbes.com article, technology expert Larry Downes argues Congress never authorized the FCC to regulate broadband Internet services: “The 1996 Communications Act specifically excluded such ‘information services’ from all but the most trivial of FCC oversight, a fact acknowledged by both the agency and the U.S. Supreme Court.” In an interview with The Verge, Berin Szoka of TechFreedom says the FCC’s likely defense is weak, based on “a series of tangential laws with nothing at their core.”

Net neutrality proponents argue they are the only thing preventing ISPs from creating tiered high-speed access lanes on the Internet, giving the fastest connection to the wealthiest customers and relegating lower-income consumers to slower connections. There has been no indication, however, that ISPs have any plans to do so. According to The Heartland Institute, prices have continued to remain stable even as the average speed of Internet connections has continually increased. Any company that chose to offer its customers reduced speeds would likely lose those customers to competitors.

Net neutrality strongly impedes broadband development, blocking Internet service providers from managing the networks they spent billions of dollars to build. When the profit incentive to build new networks is blunted by burdensome regulation, lawmakers should not be surprised that providers are reluctant to expand. This hurts the telecom industry and consumers, who lose out on new products and services. The best way to ensure fair service is to promote competition by reducing, not adding, regulations.

The following documents examine network neutrality, the legal cases that will determine whether the rule will stand, and the effects of the current law on the telecom market.


What Verizon's Net Neutrality Challenge Is Really About
http://www.forbes.com/sites/larrydownes/2013/09/11/what-verizons-net-neutrality-challenge-is-really-about/
Telecom expert Larry Downes discusses Verizon’s suit challenging net neutrality, how net neutrality came about, and why it may be moving towards repeal. “From the outset, … the FCC’s effort to pass any net neutrality rules has run into two very large problems, one legal and one technical,” he writes. “The legal problem, the one the D.C. Circuit will eventually address, is that Congress never authorized the FCC to regulate broadband Internet services. The 1996 Communications Act specifically excluded such ‘information services’ from all but the most trivial of FCC oversight, a fact acknowledged by both the agency and the U.S. Supreme Court.” 

Neutralism: The Strange Philosophy Behind the Movement for Net Neutrality
http://heartland.org/policy-documents/no-124-neutralism-strange-philosophy-behind-movement-net-neutrality
This Heartland Institute Policy Study examines the philosophy that underlies the movement for network neutrality, which telecom expert Scott Cleland has dubbed “neutralism.” Neutralism stands in striking contrast to the innocuous-sounding Internet “freedom” its advocates call for. Understanding neutralism helps explain why the consequences of network neutrality would be quite the opposite of what its proponents claim. 

The Real Cost of Network Neutrality
http://heartland.org/policy-documents/real-cost-network-neutrality
Marc Oestreich examines numerous studies that have found FCC enforcement of net neutrality rules would harm the digital economy and consumers: “The research on net neutrality points out regulation would stifle innovation and impose costs that would be passed on to consumers. Study after study finds net neutrality is an attempt to fix a ‘market failure’ that doesn’t exist.” 

More Legal Trouble for FCC’s Open Internet Order & Net Neutrality
http://news.heartland.org/newspaper-article/2013/06/04/more-legal-trouble-fccs-open-internet-order-net-neutrality
Writing for the Heartlander, Scott Cleland reports on several recent court decisions involving net neutrality and the effects the legal decisions may have on the law in the long term. 

Lawsuit: Net Neutrality Regulations Are Unconstitutional
http://news.heartland.org/newspaper-article/2012/07/24/lawsuit-net-neutrality-regulations-are-unconstitutional
The Heartland Institute’s Jim Lakely writes in the Heartlander about a brief filed in federal court by a group of free-market think tanks challenging the constitutionality of the Federal Communication Commission’s 2011 “Preserving the Open Internet” Order. The group’s amici curiae brief says the FCC’s rule denies Internet service providers their constitutional rights and forces consumers to “bear the costs of building tomorrow’s networks, foreclosing novel business models in which content companies share part of that burden.” 

The Strange Persistence of Net Neutrality
http://news.heartland.org/newspaper-article/2012/06/05/strange-persistence-net-neutrality
Noting the persistence of calls for net neutrality in the face of widespread opposition, John Stephenson of the American Legislative Exchange Council examines what’s behind support for the idea. 

The Economics of Net Neutrality
http://heartland.org/policy-documents/economics-net-neutrality
Robert Hahn and Scott Wallsten examine the economics of net neutrality and broadband Internet access. They argue mandating net neutrality would likely reduce the nation’s economic welfare. Instead, they argue, the government should focus on creating competition in the broadband market by opening up more spectrum and reducing barriers to entry created by local regulations. In cases where a broadband provider can exercise undue market power, the government can use its antitrust enforcement authority to police anticompetitive behavior. 

Research & Commentary: Advantages of Net Diversity
http://heartland.org/policy-documents/research-commentary-advantages-net-diversity
Marc Oestreich argues a non-neutral network is more secure and less open to outside threats: “An FCC-enforced net neutrality policy would bias the Internet against more robust security software and network protections, leaving it more vulnerable to hacking and other threats.” 

FCC vs. Internet Providers
http://heartland.org/policy-documents/fcc-vs-internet-providers
Ryan Krause examines the Comcast case, net neutrality, and network management in general, also discussing the benefits of a free Internet market and the dangers of FCC control. 

The Impact of Regulation on Innovation and Choice in Wireless Communication
http://heartland.org/policy-documents/impact-regulation-innovation-and-choice-wireless-communications
Everett Ehrlich, Jeffrey A. Eisenach, and Wayne A. Leighton explain how net neutrality regulations would hamper innovation and consumer choice in the wireless sector. 

Nothing in this Research & Commentary is intended to influence the passage of legislation, and it does not necessarily represent the views of The Heartland Institute. For further information on this and other topics, visit The Heartlander’s Tech News Web site at http://news.heartland.org/tech, The Heartland Institute’s Web site at www.heartland.org, and PolicyBot, Heartland’s free online research database, at www.policybot.org. 

If you have any questions about this issue or The Heartland Institute, contact Heartland Institute Senior Policy Analyst Matthew Glans at 312/377-4000 or mglans@heartland.org.