Putting the Net in Neutral: The Communicatons, Opportunity, Promotion, and Enhancement Act

The concept of "net neutrality" sounds quite reasonable in theory, but the policy proposals coming from federal legislators and bureaucrats may in reality be quite discriminatory.

The primary problem with the proposals is more complicated than their advocates have admitted in their calls to ensure that all internet content is treated equally. "It's possible that a network owner—Verizon, Comcast, etc.—could discriminate against internet traffic in a way that harms consumers," Jerry Ellig, a senior research fellow at the Mercatus Center at George Mason University, says. "But it's also possible that a network owner could discriminate in a way that benefits consumers, like guaranteeing higher-priority transmission for movie downloads." 

An economist by training, Ellig says that new laws are not needed to reach the goal of ensuring better access to internet services for all. "Antitrust law, with its rule of reason standard, provides a flexible way of preventing discrimination that harms consumers, while allowing discrimination that benefits consumers," he says. 

One of the federal agencies that deals with antitrust issues (disputes over unfair trading) is the Federal Trade Commission. According to a statement by FTC chairman Deborah Majoris, the FTC has jurisdiction over broadband networks, "because broadband isn't telecommunications." That means it doesn't fall under the jurisdiction of the Federal Communications Commission, which regulates telephony but not the high-speed internet. 

"So, while I think there may sometimes be a problem here, there's already a policy solution in place to deal with it," Ellig says. 

Congress is, nonetheless, moving forward with legislation to solve at least part of the problem. The Senate Commerce Committee sent a telecommunications bill to the Senate for consideration on a full floor vote this summer. The bill, called the Communications, Opportunity, Promotion, and Enhancement Act of 2006, would create a two-tiered internet. Under the proposed law, website owners would have to pay fees to network providers in order to have their websites load speedily; if they don't pay the fee, they will load more slowly. 

Some, however, view this as a good thing, as capitalism in action. "I don't know how much, if any, government money has been invested in building the infrastructure that exists today," Jeff Wasson, CEO of Gusto.com, a new, community-based travel website, says. "If the telcos have laid the pipes, then comparing them to a city sidewalk or our USA highway system is not accurate. Public good is what tax money does. Asking for-profit businesses to subsidize is a model that does not work. If I own something, I should be able to charge what the market can bear, plain and simple."

This, too, may sound good in theory, but policymakers need to distinguish more carefully among different types of service providers. For example, it may be increasingly important to differentiate between internet backbone providers who operate the core of the internet and broadband access providers who provide access to end-users. The latter group has never differentiated among the types of traffic. That means that the current bill before the Senate would make the internet world radically different than it is today, since the bill allows differentiation among types of traffic. 

This stance seen in the bill (and promoted by some major telecom companies) is leading to cynicism among some observers about the motivation for the change in regulations. "The telcos say they have to charge extra so they can afford to build out broadband networks," John S. Quarterman, CEO of InternetPerils, Inc., an internet security consulting firm, says. "I'd be more willing to believe that if the various incumbent carriers, or their predecessors, hadn't already been promising us fast broadband, for everyone, for many years now, and if Japan and Korea hadn't already managed it without this kind of a finagle."

Quarterman also believes that there is a free speech issue at play here, one which warrants consideration by lawmakers. "The internet alone provides a medium for distribution of information, as detailed as necessary, in multiple formats for different audiences," Quarterman says. "It is also still not yet under the control of any particular group of companies." 

(www.gusto.com; www.internetperils.com; www.mercatus.org)