Friday, May 11, 2007

Net Neutrality: Of Chickens and Eggs

Yesterday Mark Cuban, who owns the high-def TV network HDNet, along with other enterprises too numerous to mention, told the House Energy and Commerce Committee that unless there is significant continued investment in broadband infrastructure, further technological and economic advancements will be hampered. According to a Technology Daily report [subscription required], Cuban said "net neutrality" is an example of how constrained bandwidth creates conflict between consumer and broadband provider interests. Cuban said of net neutrality: "The issue goes away completely if bandwidth constraints go away."

This is probably true (for all but the hard-core net neut enthusiasts for whom the issue is never likely to go away). But it begs, or at least avoids, the important question: If net neutrality mandates were adopted, would they be more or less likely to cause bandwidth constraints to "go away"? (Because all goods are scarce in the sense that economists understand scarcity, I don't expect that bandwidth constraints will ever entirely go away.) But I am sure that bandwidth constraints are less likely to become an inhibition on Internet infrastructure growth if net neutrality mandates are not adopted. This is because these mandates prohibiting differential treatment by broadband providers of unaffiliated entities--in other words, the imposition of common carrier regulation--will inhibit the very investment and innovation that is needed to counteract bandwidth constraints.

So, if you think of a world without any bandwidth constraints as the "chicken," then Mr. Cuban is correct that you are likely not to ever see the net neutrality "egg." On the other hand, if you think of net neutrality mandates that are implemented as the "chicken," you likely would see as the "egg" a world of real and increasing bandwidth constraints.

I suspect that Mr. Cuban, being the astute billionaire businessman that he is, understands chickens and eggs in a real world practical sense. Or to put the matter another way, I suspect that Mr. Cuban understands that net neutrality mandates, if adopted, would constrain the development of consumer-friendly business models as the Internet continues to evolve, thereby dampening investment and innovation incentives--and thereby killing the chicken that is laying the golden egg.