The Fallacy of Net Neutrality

“There is little dispute that the Internet should continue as an open platform,” notes the U.S. Federal Communications Commission. Yet, in a curious twist of logic, the agency has moved to discontinue the legal regime successfully yielding that magnificent platform. In late 2010, it imposed “network neutrality” regulations on broadband access providers, both wired and wireless. Networks cannot (a) block subscribers’ use of certain devices, applications, or services; (b) unreasonably discriminate, offering superior access for some services over others. The Commission argues that such rules are necessary, as the Internet was designed to bar “gatekeepers.” The view is faulty, both in it engineering claims and its economic conclusions. Networks routinely manage traffic and often bundle content with data transport precisely because such coordination produces superior service. When “walled gardens” emerge, including AOL in 1995, Japan’s DoCoMo iMode in 1999, or Apple’s iPhone in 2007, they often disrupt old business models, thrilling consumers, providing golden opportunities for application developers, advancing Internet growth. In some cases these gardens have dropped their walls; others remain vibrant. The “open Internet” allows consumers, investors, and innovators to choose, discovering efficiencies. The FCC has mistaken that spontaneous market process for a planned market structure, imposing new rules to “protect” what evolved without them.