The ongoing debate on net neutrality in the United States pits those who believe it’s necessary for government to regulate the Internet in order to keep it free and open, against those who know that the Internet will always remain open and flourish so long as government intervention is kept to a minimum.
The crux of the debate is whether to increase regulation on broadband companies with the outdated, monopoly-era Title II provisions from the Communications Act of 1934, or to transition broadband providers to the same competition law regime that covers the rest of the internet value chain. The latter would form a level playing field for all. And at the heart of this question is whether regulation is needed to promote innovation, investment and economic efficiency.
The dramatic growth in Internet traffic in recent years is undeniable. Consumers access a range of applications and services, particularly staggering amounts of online video, which accounts for the bulk of all Internet traffic. However the rate of investment in new networks is not necessarily in lock step with the growth in traffic across countries. A new report by Christopher Yoo of the University of Pennsylvania, citing official European Union (EU) data for 2011-2012, underscores how the dynamic American facilities-based approach to broadband is preferable to European utility-style regulation when it comes to next generation access (NGA) and investment.
Access to next generation broadband networks with speeds of 25 Mbps and higher was 82% in the US, but just 54% for the EU. The coverage of 4G/LTE mobile in the US is three times the rate of that in the EU, and access to fiber networks is twice as prevalent in the US than it is in the EU. What’s more, American broadband providers invested $562 per household whereas European providers invested a paltry $244 per household. In fact, this trend has been ongoing for some years and increasingly favors the US. As such, equipped with more high-speed network capacity, Americans consume 57% more bandwidth than Europeans.
In my own country of France, Professor Yoo’s research found that France maintains only 24% NGA coverage, and therefore ranks 25th out of 28 EU countries, and far behind the U.S. Additionally, rural NGA coverage almost does not exist in France. As this data demonstrates, the French approach for managing broadband infrastructure should not be emulated.
The data clearly shows that the American approach is working much better. That is why it is so strange that some are calling for the US to follow Europe with outdated, disproven utility regulation of broadband.
The fact of the matter is that American broadband providers already support an open Internet where users have the right to connect to the legal content, applications, devices, and services of their choice. This is the essence of net neutrality that should be preserved. Since the American courts struck down the Federal Communication Commission’s (FCC) attempt to overstep its authority with overly strict and vague net neutrality rules, pro-regulatory proponents have conflated net neutrality, historically a notion of traffic management on the last mile connection, with unprecedented price controls and embargos on broadband providers to engage in business models that benefit the Internet value chain.
The Internet value chain is sufficiently complex and rich in possibilities. The diversity of consumer preferences means that there is room for a variety of content, applications, and business models. To deny any models or partnerships a priority reduces consumer welfare. Content and applications providers have shown that they can be successful at attracting their own audience, and this dynamic drives the demand of consumers to purchase Internet subscriptions. No operator would be misguided enough to inhibit this process, but if it did, competition law provides various effective remedies.
Rather than considering burdensome and unnecessary new regulations, policymakers should focus on the important role of ensuring transparency and the rights of consumers to information and extending these standards across all players in the Internet value chain.
An objective analysis clearly shows the way forward and what must be avoided. The US is on track to exceed South Korea on Internet consumption and become #1 in the world. American network investment continues apace and consumers have access to the content and applications they demand while Europe lags behind. In the face of such progress, imposing 1934-era rules on broadband networks would clearly be a terrible mistake.
