Net Neutrality Regulation Under Fire from Congress

Published November 27, 2009

Members of Congress, both Republicans and Democrats, are expressing growing concern about plans by the Federal Communications Commission to impose network neutrality regulations.

In the weeks leading up to October 22, when the FCC held a “Notice of Proposed Rule Making” meeting to take up binding net neutrality regulations, two critical letters from Congress reached the desk of FCC Chairman Julius Genachowski.

Warning Letters

Rep. Cliff Stearns (R-FL) and 19 other Republicans on October 5 asked the FCC to conduct a “market analysis” of the broadband landscape before going any further.

“At first glance, net neutrality regulations may appear reasonable and harmless, but a deeper examination reveals that net neutrality is neither reasonable nor harmless,” wrote Stearns, the top Republican on the House Commerce Committee’s Communications, Technology, and the Internet Subcommittee. “These mandates would harm consumers, reduce competition, and discourage new investment and innovation at a time of tremendous technological growth.”

On October 15, 72 House Democrats signed a letter urging the commission “to carefully consider the full range of potential consequences that government action may have on network investment.”

“Like you, we believe in a transparent, data-driven process and stand ready to work with you on measures that will spur adoption and expand the use of broadband networks,” read the letter written by Rep. Gregory Meeks (D-NY). “But we remain suspicious of conclusions based on slogans rather than substance and of policies that restrict and inhibit the very innovation and growth that we all seek to achieve.”

Competition Increasing

The net neutrality debate centers on whether Internet service providers (ISPs) may prioritize traffic flowing through their networks. Neutrality opponents want all traffic to have the same priority, regardless of source, destination, application, or content. Market advocates say ISPs should be subject to the constraints of existing laws and the marketplace, not new regulations.

Until recently, the “last mile” of the network, from the consumer to the immediate ISP, was in most cases dominated in any locality by one provider, typically a cable television company or local telephone carrier offering a digital subscriber line (DSL).

But wireless telephone companies such as AT&T and Sprint have begun bundling Internet service, with speeds similar or superior to those offered by cable and DSL. Those wireless plans were rolled out nationally, providing instant competition for the last mile of connection.

Solutions, but No Problems

Bartlett D. Cleland, director of the Center for Technology Freedom at the Institute for Policy Innovation in Lewisville, Texas, characterizes new guidelines, especially those on openness and transparency, as solutions in search of problems.

Cleland believes the entry of wireless companies into the ISP market “utterly changes the game” and argues for less regulation, not more.

“Only about a year and a half ago I heard Google CEO Eric Schmidt speak as a big proponent of net neutrality legislation,” Cleland said. “Back then, you had a fairly healthy chunk of the public that had only one option for getting broadband.”

Consumers in Control

With the entry of the wireless companies–and continued expansion of cable and DSL access–many more people, even in rural areas, have several options for broadband access, providing more market power for consumers.

Jim Harper, director of information policy studies at the Washington, DC-based Cato Institute, says consumers are effectively responding to perceived harm from companies playing favorites with Internet traffic.

“When Comcast ham-handedly tried to handicap the bit-torrent protocol, people found out about it,” Harper said. “People made noise about it. It got written up in the papers, and Comcast stopped doing it. Those are market processes.

“Consumers express themselves through dollars, and ISPs are in the business of making money, so the incentives all line up just the right way to get this fixed through market processes,” Harper said.

Cleland agrees. “Schmidt even said in his speech that if there were three or four competitors in the market for the last mile, it would be a different story. There are now several options in most areas,” Cleland said, making net neutrality regulation unnecessary.

Regulating and Speculating

Jerry Ellig, a senior research fellow at the Mercatus Center at George Mason University in Fairfax, Virginia, warns against imposing regulations based on “speculation” about the state of the tech market.

“An ISP might have an incentive to discriminate against certain kinds of content if it is also selling competing content,” Ellig said. “But if you also have different competitors, then competition limits any individual company’s desire to discriminate, because if customers don’t like the discrimination they can go to a competitor.”

“There are people who believe and trust in government to make good decisions, and people who trust companies to make good decisions” Cleland said. “I tend to trust people to make good decisions. It looks like what’s missing most at the FCC is that trust in the people and the profit motive of business.”

Advantages of Market ‘Pain’

Harper notes that perceived imperfections in the marketplace are actually necessary for it to function properly.

“The interesting thing about competition is that it requires some pain in order to move forward,” Harper said. “If you use network neutrality to prevent the consequences of insufficient competition from arising, then you will never cure the actual underlying problem” of too few suppliers in the marketplace, he added.

Loren Heal ([email protected]) writes from Neoga, Illinois.

For more information …

Letter by Rep. Gregory Meeks (D-NY) and 71 other House Democrats to Federal Communications Commission Chairman Julius Genachowski, October 15, 2009:

Letter by Rep. Cliff Stearns (R-FL) and 18 other Republicans to Federal Communications Chairman Julius Genachowski, October 5, 2009: