How important is ‘network neutrality‘? In the United States, the Federal Communications Commission thinks it’s such a big deal that it’s willing to completely ignore court rulings and potentially even Congress in its altruistic effort to ‘protect consumers.‘
But in a rare example of thoughtful governmental restraint, Ofcom, the UK’s communications regulator, has determined that network neutrality may not be all that it’s cracked up to be.
In a discussion document entitled “Traffic Management and ‘net neutrality“, Ofcom concludes that “a prohibition on network operators/ISPs charging content and applications providers for access to consumers is unlikely to lead to efficient market outcomes.“
Why is that? Because internet access is a two-sided market — “the two sides consist of consumers purchasing internet connectivity on the one hand, and content, applications and service providers on the other.” Both consumers and providers benefit from the connectivity provided by the ISPs. Consumers gain access to content, applications and services, and providers gain access to consumers.
Proponents of network neutrality dismiss concerns about network congestion and the need ISPs have to manage traffic, and they are repulsed by the notion that ISPs should be able to charge providers for priority access to their pipes. Yet Ofcom notes that ISPs will have little incentive to act foolishly:
The main regulatory implication is that when a platform sets the prices on each side it should in theory take into account these linkages to get the right (most profitable) balance between participation on both sides. For example, charging too much to consumers, will lead to reduced take-up of broadband internet. The internet then becomes less attractive to content and application providers. Conversely, if network operators and ISPs overcharged content and applications providers for access to consumers, that would lead to reduced investment in content and applications, which would in turn make the internet less attractive to consumers. In theory, the ISP is well-placed to act as an ‘honest broker’ bringing two sets of preferences together.
ISPs as ‘honest brokers‘? While some simply look at ISPs as evil corporations that can’t be trusted, one fact above all others stands out:
At the heart of the traffic management and net neutrality debate, is a concern that traffic management could be used as a form of anti-competitive discrimination. To date Ofcom has received no formal complaints from industry that require investigation. [Emphasis mine]
In the United States, the network neutrality debate is largely the same: you’ll find lots of bickering between ISPs and major internet companies like Google about theoretical discrimination, but you’ll have a hard time finding legitimate complaints evidencing real consumer harm, something that the Federal Trade Commission has itself noted. The closest thing to such evidence: Comcast’s past throttling of BitTorrent traffic. That’s a dubious basis on which to engage in network neutrality fear mongering given that some surveys indicate 99% of the files on BitTorrent infringe copyright.
At the end of the day, it’s worth remembering that the internet, largely free of the kind of overbearing government
regulation that can choke offline economies, has brought the world great innovation
and opened up new global markets that never before existed. It’s nice to see that at least one government agency understands the wisdom of ‘if it ain’t broke, don’t try to fix it.‘