In the past few weeks the Wall Street Journal has posted two opinion pieces online (here and here) basically claiming that Net Neutrality was dead. The blogs exploded, claiming that reports of Net Neutrality’s demise were greatly exaggerated: David Isenberg, Tim Karr, Harold Feld, Gigi Sohn, Google’s Rick Whitt, DSL Reports, and Rob Frieden to name a few. These really smart telecom policy wonks picked apart the numerous errors in the WSJ pieces errors. (I do have to correct one glaring error in the Gordon Crovitz piece. The specter of Net Neutrality regulation has not caused a low level investment in broadband access and the US’s low rankings in the international adoption statistics. I hope that would strike you as obvious.)
The basic thrust of their arguments was a content-cashing-versus-content-transmission distinction. What Google is doing is moving and distributing its content closer to the end recipients in an effort to improve delivery speed and quality. It was not seeking preferential treatment in terms of the transmission of its traffic. From a service perspective, I am not sure there is much of a difference.
What is truly at the core of the debate is common carriage versus private carriage. These are not new ideas. Common Carriage traces its origins to the Roman Empire. As such common and private carriage express competing notions of fairness and economic efficiency. We think it is unfair to give preferential treatment to certain (read wealthy) customers. At the same time, we also think it is economically inefficient to mandate a single (or limited set of) Internet access options for everyone, including those who are willing to pay more for premium services. So, how do I determine which means of achieving differentiated services is economically permissible and socially desirable?
Insight: To my mind this is not so much a question of network practices (i.e., routing versus caching), but of market power and market failure. Don’t get me wrong. I am a proponent of Net Neutrality. However, the most effective way to promote welfare-enhancing differentiation from anti-competitive discrimination is the presence of effective, sustainable competition. This is, by no means, a guarantee. As David Isenberg correctly points out, the US has four major wireless carriers, but no truly open mobile networks. (As I have argued in a previous Cool Stuff that wireless devices are not a perfect analogy to wireline Internet). Nonetheless, in the absence of competition to constrain the behavior network providers, some form of regulation will be required. Once the regulator is required to dictate allowable and unallowable network practices, all of the options are unattractive. In the light of the incoming administration, we should be considering how best to (re)introduce effective, sustainable competition.