Freedom, Regulation, and Net Neutrality
13 September 2007
By Dr. William Taylor
In this paper, NERA Special Consultant Dr. William Taylor explores the current debate over the principle of net neutrality and regulations designed to support the neutrality of the Internet, which embodies at its core a fundamental contradiction. While some parties extol the freedom of the Internet -- freedom from metering and from such government interference as taxation, commercial regulation, or political or moral censorship -- others argue that the Internet is a business, and their facilities and the services that ride upon them must be managed and priced to be as profitable as possible. The contradiction arises when those desiring freedom from government interference advocate government regulation to protect themselves from potential anticompetitive actions or monopolistic exploitations by those who supply last-mile broadband access to the network.
This paper focuses on the economics of one aspect of net neutrality, "access tiering," in which websites that pay for quality of service (QoS) receive network bandwidth priority. Dr. Taylor examines whether the current Internet standard of "best effort" carriage of data packets should be modified to allow carriers to provide different QoS in some dimensions for a price to different applications, different application providers, or different customers. While supporters of Internet regulation have said that phone and cable companies could discriminate against certain websites and services, Dr. Taylor argues that imposing a net neutrality regulation could hamper development of the Internet (particularly bandwidth-needy applications) and prevent service providers from upgrading or expanding their networks, as well as shift the burden of implementing costly network expansions and improvements onto consumers.
