The Problems with Network Neutrality

Published May 1, 2006

Network neutrality is the principle that Internet Service Providers (ISPs) should not discriminate against different types of content on the Internet.

For example: With advances in technology, ISPs can pipe television programs over their broadband lines to compete with traditional cable, phone, and satellite video services. But video content is bandwidth-intensive, and therefore requires more resources for a smooth, error-free transmission. Network neutrality legislation would prohibit ISPs from giving priority treatment to video or voice content for an added fee.

On its face, then, “neutrality” seems like a fair idea. But on further examination, it becomes clear why network neutrality is unnecessary and stifling to innovation.

Proponents of network neutrality imagine that if unrestrained, ISPs would block large portions of the Internet, and make other parts of the Internet accessible only behind a high-pay wall. While this is possible in theory, robust competition among service providers ensures companies will be punished for providing such egregious service. There are plenty of access providers: cable and phone companies and cooperatives, national ISPs such as EarthLink and AOL, wireless service providers and WiFi networks, and now, potentially two-way national satellite transmission. If any company adopted the measures network neutrality supporters envision, customers would jump ship to an ISP that gives better service.

Solution in Search of a Problem

Currently there are no principles of network neutrality encoded into law. So ISPs are already free to block or favor content as they please. It’s telling that none of them has. In fact, no proponent of network neutrality can cite an existing problem to which network neutrality is a solution.

By contrast, mandatory network neutrality is bad for business. Unlike the narrowband phone lines of the twentieth century, broadband pipes are being built with billions of dollars of unsubsidized investment in a competitive environment. ISPs make this investment on the assumption they can recover the costs and profit. As such, broadband lines are not the “public resource” that monopoly networks were in the past. Companies that own high-speed lines have a right to recover the costs that other parties impose when they wish to use those lines to transmit high-bandwidth, revenue-rich services of their own. If network neutrality is enacted, ISPs will have no incentive to build new pipes. Consumers will therefore get less choice.

Network neutrality also is bad for competition. Differential pricing of content allows competition among ISPs. If a company wants to adopt a policy of network neutrality, it is free to do so and win market share from consumers who find this attractive. If a company wants to favor video or voice content, it can find consumers and applications providers who use the Internet primarily for this purpose.

Niche companies that want to offer only a small fraction of the Internet can flourish, too. Imagine, for example, a company that allowed cell phone users to access sports scores and only sports scores through its Internet portal. If that company were upfront about restricting its service to a limited part of the Internet, this would not be a nefarious idea. Many people would find it quite convenient. But it would nonetheless be banned if network neutrality legislation were passed. Network neutrality will destroy many entrepreneurial ideas like this one.

Network neutrality would constitute a major government initiative to regulate how the Internet as a commercial vehicle operates. Today, in America, Congress has virtually no power over how the Internet is run. Network neutrality is a sweeping and intrusive restriction. It would set a horrible precedent in terms of the government’s ability to meddle with the architecture and operation of the Internet. It also would create a spider web of laws and restrictions that generate uncertainty and open the floodgates for bureaucrats and lawyers to exploit semantic loopholes. We have done well enough without the government’s intrusion in the Internet, there’s no reason to start now.

If history has taught us anything, it’s that the government shouldn’t create rules that preemptively close off technological and business evolution. Doing so will lead to unintended consequences … usually bad ones.

Equality is nice in theory, but when we have the “equality” of a monopoly, that’s not so great, is it? At the end of the day, let consumers decide. Part of letting consumers decide is letting businesses experiment with new technological and pricing models, which is exactly what network neutrality forbids.

Arpan Sura ([email protected]) is a researcher at FreedomWorks.