Economists Rebuff Lawmakers’ Letter by Advocating for Network Neutrality

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.