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Economists Rebuff Lawmakers’ Letter by Advocating for Network Neutrality

in Broadband Updates/Broadband's Impact/FCC/Net Neutrality by

WASHINGTON, July 9, 2010 – Four economists argued in a letter to the FCC sent Wednesday that the question before the agency was “not whether to impose network neutrality, but whether to eliminate it.”

They responded to a letter also sent to the FCC that was drafted by 74 Democratic lawmakers who said the FCC’s plan to impose new regulations on the internet would violate a standing bipartisan consensus about leaving the internet unregulated. The economists argue that, in the aftermath of deregulatory court decisions like the Comcast case, the question is whether to restore what was previously the status quo, not whether to impose new regulation. The court ruled that the FCC did not have the authority to regulate Comcast's control over the speed that data flows through its networks.

The economists make a number of arguments regarding the economic externalities and market failures that they say currently exist on the internet. They allege that lifting pre-Comcast regulatory authority would exacerbate these failures.

A key point of the letter is the claim that, prior to this regulatory shift, the internet had operated under a de facto net neutrality regime. They argued, “most internet service providers do not currently engage in prioritization or price discrimination tactics that would be restricted under the proposed rules.” The letter does not explain the origins of this regime; rather, it assumes that it occurred due to existing regulations.

The authors also say in the absence of network neutrality, potential exists for a massive redistribution of wealth from content providers to internet service providers, a redistribution which they argue would be regressive, since content providers are already paid so little.

The economists who signed the letter were: Hsing (Kenny) Cheng, American Economics Institutions fellow; Joacim Tag, Research Institute of Industrial Economics; Scott Holladay, Institute for Policy Integrity at New York University School of Law; and Subhajyoti Bandyopadhyay, University of Florida.

Mytheos Holt recently graduated from Wesleyan University with a B.A. in Government and History, receiving high honors in Government. He served as a weekly columnist at the Wesleyan Argus, Wesleyan University's campus-wide newspaper, and founded the Wesleyan Witness political commentary magazine. He is originally from Big Sur, Calif., and currently resides in Washington, D.C.


  1. Do you have a link to this letter?

    The economists sound like they are referring to the Title II classification the Internet was under when it originally “went public,” which indeed was net neutrality — the Internet was rolled out under line sharing rules that assured that thousands of ISPs entered the market and competed to provide Internet access. Competing autonomous routers following the Internet Protocol will naturally transmit packets uniformly and regardless of application.

    But your article isn’t clear on this, so I’m not sure. The Comcast ruling was based on a subsequent move by the FCC, which put the Internet outside of line sharing rules and was actually the moment when the incumbents were first empowered to begin working to eliminate net neutrality. Under that FCC move, they did not have authority to penalize Comcast. But under the original classification, the FCC would have that authority.

    Congress did not act to eliminate line sharing; the FCC did.

  2. As a lawyer with a background in economics, I can safely say that economists should stay out of the policy realm unless being asked to testify for a lawyer’s client .

    The status quo referenced by these economists, the four net neutrality principles, was never abandoned by the FCC; therefore, there is nothing to restore. The real problem is going to the unnecessary extreme of implementing regulation of a broadband access provider’s network management practices.

    By ignoring this important point, these economists skillfully evade the issue of the negative externalities, i.e. higher consumer bills, that broadband subscribers will have to pay as the cost of delivering non-prioritized traffic increases.

  3. I do not readily accept that substantial evidence exists to prove that there have been “market failures” with regards to the Internet. If anything there has been a demand that has outpaced supply – think of those peak hours when connections sometimes struggle.

    However, there has been more than ample competition in Internet markets. I have lived in both rural and urban environments, moderately sized and metropolitan areas – in each place I have lived there have been multiple companies that provide broadband services. Most of them have done so well; I have had few complaints.

    Furthermore, I can’t fathom how this mass exodus of wealth will occur to the detriment of content creators, especially considering that the vast majority of web content is unsolicited. Content creators who have found ways to get paid are, in my opinion, anomalies – should I suggest that those who view my comment here pay me?

  4. OK. The economists argue: “most internet service providers do not currently engage in prioritization or price discrimination tactics that would be restricted under the proposed rules.” So, the authors would like service providers to freeze their current business models, and to close the door to any future changes, even if those changes will have a positive impact on broadband penetration across the United States. In an industry that changes as fast as technology does, being static means going bankrupt.

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