Congress Seizes on Net Neutrality

(Note: The following commentary originally appeared in The Heartland Institute’s monthly newsletter "IT&T News.")

Few enterprises enjoy the freedom from regulation that has characterized the Internet and its remarkable advancement. But a clash of interests between various service providers now threatens to unleash government involvement in the most basic facets of broadband service.

Network neutrality, a topic that was the province of network specialists just months ago, has become a major sticking point as Congress maps out telecom reform. Network neutrality is a principle that calls for service providers to treat all data the same as it crosses their networks. It also calls for open and unfettered access to all legal Web sites.

Neither of the telecom reform bills currently pending in the House and Senate contain net neutrality provisions. As of early June, however, no fewer than six net neutrality bills were pending in Congress. (See chart.) If enacted, the bills would impose varying degrees of price controls and access requirements on broadband network owners for the first time. Mainstream liberal political action groups, such as MoveOn.org, have joined the call, as have popular musicians such as Moby.

The first of these network neutrality initiatives to reach the House floor, a bill sponsored by Rep. Edward Markey (D-MA) that was offered as an amendment to the Communications Opportunity, Promotion and Enhancement Act (which creates a national franchising process for cable TV competitors) was defeated in a voice vote.

Battle of the Big Boys

Several of the most powerful Internet content providers, such as Yahoo, Google, Apple, Microsoft, and Disney, want lawmakers to prohibit the owners of broadband networks from instituting premium tiers of transmission services.

The content providers contend that priority services such as higher-speed transmissions would destroy the "neutrality" of Internet traffic, which currently moves on a first-come, first-served basis. They also claim premium pricing would limit Web surfers’ freedom by allowing network owners to give transmission priority to more profitable content providers.

But network owners argue tier pricing could help to generate the revenue needed to expand broadband infrastructure, which is inadequate for widespread delivery of video and other new bandwidth-intensive services. Moreover, they say, it would be positively foolish for any network operator to deny customers access to Web content when competition for broadband service is so fierce.

The seriousness of the debate cannot be overstated, analysts say. "Net neutrality is the most important tech-com policy issue for investors, policymakers, and consumers to understand for the rest of the decade," said Scott Cleland, an analyst with Precursor, a research and consulting firm.

Beyond the matter of tier pricing, the debate encompasses fundamental issues of property rights and free enterprise. Five of the six bills addressing net neutrality would effectively structure the Internet as a public utility and relegate network owners to the role of common carrier — a dramatic departure from the unfettered nature of the online universe.

"In reality, what [these measures] would do is bring the heavy hand of government regulation crashing down on the competition and freedom that has flourished on the Internet," said Raymond J. Keating, chief economist of the Small Business and Entrepreneurship Council.

As the debate proceeds in various House and Senate committees, Federal Communications Commission Chairman Kevin Martin is urging regulatory restraint in the absence of any evidence of a problem.

In his keynote address at a recent trade show, Martin expressed a clear preference for regulatory neutrality in the pricing conflict. "We need to make sure we have a regulatory environment (in which network operators) can invest in the network and can recoup their costs," he said.

Diane S. Katz is the director of science, environment and technology at the Mackinac Center for Public Policy, a research and educational institute headquartered in Midland, Mich. Permission to reprint in whole or in part is hereby granted, provided that the author and the Center are properly cited.