Neutering the Net

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Because the internet has become such a fundamental, inescapable tool in everyday life for most Americans, many argue that it is now under threat of severe regulation. The CATO Institute offered an analysis this week of network neutrality regulation, and the perceived threat toward internet users and internet-based companies.

Network neutrality regulations allow companies which control networks to impose restrictions on which types of sites, applications and content can be accessed. Because of network neutrality, which is the basis for web-based entrepreneurship, applications and websites ranging from YouTube to Skype to Google exist for public use.

One of the key principles that allow the internet to function in its current form is the “end-to-end” principle. In a policy analysis entitled “The Durable Internet: Preserving Network Neutrality without Regulation,” Timothy Lee, an adjunct scholar at the CATO Institute, explains this idea as a “principle that networks should confine themselves to transmitting generic packets without worrying about their contents.”
Applied to the real world, this means that companies like AT&T, which host networks allowing customers to access the internet, comply with the “end-to-end” principle by minimalizing regulation of programs and applications.

Lee’s discussion of network regulation focused on the efforts of “self-styled ‘network neutrality’ activists [who have] pushed for legislation to prevent network owners from undermining the end-to-end principle.” His argument was that despite the logical reasoning behind the legislation, it is too soon and simply unnecessary to impose regulations at this time. ,p>

Lee explains that not withstanding passionate debate on both sides of the issue, network neutrality is not actually in danger. “There is a widespread assumption on both sides of the network neutrality debate that the large companies that own the internet backbone could, if they wanted to, transform the internet into a provider network…” The fear is that if such a transformation occurred, these large companies could charge internet-based companies like Google for using the internet. This is in direct conflict with the “end-to-end” principle.

However, this fear is unfounded, as Lee explains. He explains that there are “thousands and thousand of different web-based applications on the internet”, and “if AT&T wants to force websites [like Google] to pay money, it has a chicken and egg problem, because there is safety in numbers. These websites all know that any one of them is not very likely to be singled out.” AT&T could never force all of these applications to pay because they would probably all refuse. If AT&T blocked applications as a result, they would lose customers and credibility among professional and casual users.

Lee continues, “It’s simply not clear to me that AT&T has the ability that both sides of the internet debate seem to assume it does to arbitrarily impose fees on people who are not their customers.”

Another reason that Lee opposes legislation on network neutrality is because he believes there will be unintended consequences that often accompany regulation. He compared the current regulation debate to debates over railroad regulation when they were first introduced in the United States. Because larger railroad companies dominated the market and had an advantage of smaller companies, Congress felt the need to enact legislation. As a result, large railroad companies went to great efforts to gain power in the International Commerce Committee, which it then used to limit competition. Regulation actually became necessary, Lee argues, only after an attempt to regulate was made.

Regarding current legislation, Hal J Singer, President of Criterion Economics and author of an article entitled “Net Neutrality: A Radical Form of Non-Discrimination, wrote the following:

“The current legislative proposals, if adopted, would impose all sorts of “duties” on broadband providers. One duty of a broadband service provider would be a non-discrimination requirement to offer the same quality of service to all content providers. Effectively, a broadband service provider would be able to offer enhanced QOS [Quality Of Service] to a given content provider, but if it did so, it would have to offer the same level of quality to all content providers free of charge.”

“What do these duties mean in practical terms? Suppose that AT&T enters into a contract with Sony in which Sony pays AT&T a fee to guarantee that Sony’s online gaming customers can enjoy their online games in real-time without any disruptions. Now suppose that Congress passes this version of net neutrality. AT&T must offer the same level of quality to all of Sony’s gaming rivals free of charge. At that moment, Sony would insist that its contract with AT&T be nullified. Why should Sony have to pay for something that all its online gaming rivals get for free?”

With network neutrality legislation on Obama’s to-do list, lose-lose situations like the one described above by Singer may become the reality within the next few years. The conclusion drawn at the CATO Institute was that network neutrality is probably not in danger—but regulating network neutrality will bring a host of problems to a system that is already running smoothly. If it isn’t broken, don’t fix it.

Daniel Allen is an intern at the American Journalism Center, a training program run by Accuracy in Media and Accuracy in Academia.