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No, Scrapping Net Neutrality Laws Won't Kill the Internet

December 19, 2017 in Economics

By Ryan Bourne

Ryan Bourne

The decision by the US Federal Communication Commission (FCC) to
remove so-called “net neutrality” laws last week
produced a flurry of outrage.

The American media company Netflix was most vociferous,
declaring on Twitter: “we’re disappointed in the
decision to gut #NetNeutrality protections that ushered in an
unprecedented era of innovation, creativity, and civic
engagement.”

Such sentiment has echoed around the world. But all of this
seems odd.

Netflix itself has been streaming media online since 2007, and
the specific President Obama-era net neutrality laws only came into
force in 2015.

The whole reaction to
this has been overblown. Repeal of the laws will allow ISPs to
experiment in providing packages that consumers want.

Was the internet before 2015 really the barren, innovation-free
zone painted by critics of last week’s change? Or are
opponents of the FCC decision prone to hyperbole?

The economics of this debate are well-known.

The internet is a means of transporting content, or packages of
information, from one computer to another.

In essence, net neutrality regulation requires that internet
service providers (ISP) treat and price all packages of information
in the same way, regardless of origin or content.

So when we have some highly-demanded video content, such as
Netflix or adult entertainment websites, ISPs cannot charge these
providers a connection fee to have its content transported to
customers on a faster lane.

On the consumer side, ISPs are likewise unable to offer packages
that charge more for certain types of content, or restrict access
to certain sites (though they can of course discriminate via
internet speeds).

This is a textbook example of old debates about
“producers” and “transporters” of
goods.

For net neutrality advocates, an open internet requires all
content to be transported equally. Advocates worry that ISPs may
otherwise block content entirely, that consumers in areas without
much ISP competition will face higher prices, and that without the
laws there will be an incentive for ISPs to “vertically
integrate” with providers of content, potentially
prioritising their own materials.

For sure, these are valid questions. But do they require such
heavy-handed state regulation?

The reputational damage to an ISP of restricting access to
popular content is likely to be severe.

Indeed, if consumers overwhelmingly want a “neutral”
internet, then ISPs are likely to at least offer a package which
provides it.

Existing competition laws can likewise be applied to
monopolistic concerns. In fact, a non-net neutral world actually is
likely to facilitate more dynamic competition and investment in the
ISP market, since the ability to price discriminate will increase
the pay-offs by investing to serve rural or other
difficult-to-reach communities (a particularly important concern
here).

It’s worth noting that in the two years since the
Obama-era, when net neutrality laws …read more

Source: OP-EDS

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