New Study Suggests Benefits for Net Neutrality Policies

WASHINGTON, January 14, 2010 – Internet service providers and content providers are at a disadvantage since they are not compensated for all of the information they disseminate, and that leads to systematic underinvestment in the Internet, posits a new paper (PDF).

The authors of “Free to Invest: The Economic Benefits of Preserving Network Neutrality” say if that income could be accessed, government policy could help overcome that market failure.

Without network neutrality rules, new technologies could lead to pricing practices that transfer wealth from content providers to ISPs, which the authors say is a form of price discrimination investment for    Internet content managers. Web site owners, bloggers, news organizations and others would have less incentive to expand their sites and applications, says the report, published by the Institute for Policy Integrity at the New York University School of Law.

The authors, Inimai Chettiar and J. Scott Holladay, say additional investment in broadband infrastructure also would increase the value of the Internet by making it faster and accessible in more places.

“But charging content providers for access to ISP customers is an extremely inefficient economic tool to do that, primarily because most additional revenue generated for ISPs is likely to be transferred to their shareholders rather than invested in expanding broadband lines,” they say.