Wednesday, May 07, 2008

Straight Talk on Net Neutrality Straitjackets

In yet another hearing on Net Neutrality yesterday before the House Subcommittee on Telecommunications and the Internet, Christopher Yoo's testimony was especially straightforward and persuasive -- for those with open minds and willing to be persuaded. Yoo is Professor of Law and Communication and Founding Director of the Center for Technology, Innovation, and Competition at the University of Pennsylvania. He is also a member of the Free State Foundation Board of Academic Advisors.

Professor Yoo's testimony is worth reading in full. His bottom line: Instead of enacting new laws or regulations, "[t]he better solution is to pursue what I have called 'network diversity,' in which different providers are permitted to experiment with different approaches and to let the choices of consumers control the ultimate outcome."

Here are some highlights that lead him to this conclusion:

  • "Internet traffic is growing not only in terms of size, but also in sophistication. During the Internet’s initial phase, the primary applications were e-mail and web browsing. For these applications, delays of a fraction of a second were virtually unnoticeable. The current Internet is increasingly dominated by more sophisticated applications such as streaming media, online gaming, telemedicine, and virtual worlds, which are often much more bandwidth intensive and much less tolerant of delay. The most important development is the deployment of IP video, which some experts estimate will cause that traffic to grow once again at a rate of 90% to 100% each year. Network providers are pursuing a number of strategies to meet this rapidly increasing demand. Unlike the initial transition to broadband, which only required reconditioning existing cable and telephone technologies, the new strategies require significantly greater capital investments."
  • "But perhaps the most important and most often overlooked development is the emergence of wireless as a major broadband competitor. The most recent FCC data reveal that wireless has skyrocketed from having no subscribers as of the beginning on of 2005 to controlling 35 million subscribers and 35% of the market for high-speed lines as of June 2007. Published reports indicate that wireless broadband has continued to grow rapidly. The result is that the broadband industry is becoming increasingly competitive. Even network neutrality proponents concede that an increase in competition undercuts the justification for regulatory intervention."
  • "Network providers must thus make decisions that involve difficult tradeoffs based on their best guess of what the future will bring. These considerations underscore the problems associated with any one-size-fits-all solution to the Internet. The network now consists of very different transmission technologies, each of which is susceptible to different problems and different solutions. In addition, the number of potential solutions is vast, including building additional bandwidth, storing content locally, and network management."
  • "Thus, in order to protect against 'death by a thousand cuts,' any regulator would have to undertake comprehensive oversight of essentially all facets of the business relationship between the parties. The challenge of doing so would be particularly demanding in industries like broadband, which are undergoing rapid technological change. This has led many commentators to conclude that any attempts to mandate access to such complex technologies are likely to prove futile. Indeed, past efforts to impose similar access regimes, such the controversy over protocol conversion and vertical switching services under the Computer Inquiries, leased access to cable television networks, and unbundled access to network elements under the 1996 Act, have become bogged down in incessant controversies and litigation."

In the past several years, Professor Yoo has emerged as one of the leading scholars on the "law and economics" of network industries, particularly with respect to broadband and the Internet. I am under no illusion that his testimony will put to rest the campaign by all of the net neutrality advocates for the enactment of new "neutrality" laws and regulations. But I do remain hopeful that it will give pause to at least some of these advocates.

With all the changes and dynamism occurring in the marketplace and in technology described by Professor Yoo, now is not the time to risk stultifying and ossifying the Internet by adding new laws and regulations that are likely to prove to be straitjackets with unforeseen and unpredictable consequences.