Network Neutrality (not simply a question of market vs. government)

Ok, another point that should be made clear. From Spillovers:

The network neutrality debate is filled with arguments that falsely pit “the market” against “the government” in a battle for supremacy as the preferred system for allocating resources. Such arguments conveniently ignore, first, that the government has been, is, and will continue to be involved in the (de)regulatory environment in one way or another and, second, that managing infrastructural resources as commons and letting spillovers flow does not exclusively depend on either market or government allocation. An Internet infrastructure commons built on nondiscrimination rules may be an attractive allocation mechanism precisely because it avoids individualized allocation by either market or government decision makers. [for more detail, see paper]

Christopher Yoo, for example, argues that the government should not intervene and alter the status quo; government forbearance is the answer. Larry Lessig has also argued for maintaining the status quo, but he has argued that the end-to-end principle is what should be sustained. Yoo’s baseline is the network owners’ freedom from government regulation and Lessig’s baseline in users’ freedom from network owners’ discrimination. These conflicting claims of freedom give rise to the network neutrality debate but do not, in isolation, tell us how the debate should be resolved.

The “market versus government” argument is also particularly inappropriate in the telecommunications context because the market in question is not a competitive one, but one characterized by enormous economies of scale, long-term market power, and network effects. Whatever the merits of a free market against government regulation – and we think they are generally great – they have little bearing on a choice between government and an unregulated monopolist not subject to the discipline of market forces.

Thoughts?

3 thoughts on “Network Neutrality (not simply a question of market vs. government)

  1. The fear that supporters of regulation keep repeating is the potential threat of ISPs blocking content or withholding all bandwidth from companies that don’t play by their rules. But if an ISP were to do this, its customers would leave in favor of a provider who uses their powers more responsibly. Is that not a “market” force, even though the consumer is really a third wheel in this battle between network operators and content providers? And if the alternative to allowing consumers’ right-to-choose is government regulation, then I think there is support for the contention that this is a free market vs. government issue.

  2. A few points. First, as I mentioned in the previous post and in other work, discrimination by network owners raises problems above and beyond blocking and withholding of bandwidth from companies that don’t play by the rules, and these problems are not cured by relying on competition to discipline infrastructure providers. (So I do believe there is a strong case for government regulation to alleviate a market failure that market forces alone will not solve.) But I do agree with you that a competitive market *might* (depending on, among other things, the degree of transparency for consumers to observe and react to irresponsible behavior) discipline ISPs that act in an anticompetitive manner or irresponsibly.

    Second, we are not really talking about a simple binary choice between allowing consumers to have a right to choose and government regulation. Sure, a nondiscrimination rule regulates the infrastructure access market (making it comparatively less “free”), but it sustains freedom in downstream markets for applications, content, innovation (making them comparatively more “free”). We can argue about this plenty, but ultimately, I think we end up with competing claims for freedom and/or free markets that cannot be settled by simple claims that one regime or the other best characterized as the “free market” alternative.

    Two more quick points: I think it is worth pointing out that a nondiscrimination rule does not preclude network owners from competing in downstream markets. And finally, as I mentioned in the post and develop in detail elsewhere, an Internet infrastructure commons built on nondiscrimination rules may be an attractive allocation mechanism precisely because it avoids individualized allocation by either market or government decision makers
    (i.e., on the basis of users’ willingness to pay or users’ ability to influence government decision makers).

  3. The point about government interference is still quite valid. The question must be asked about what sort of Pandora’s Box would be opened by government regulation? I think it is the wrong one and at the bottom is not hope like in the Greek myth.

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