Business Week on Net Neutrality
July 13th, 2007

I have always found Business Week to be an unusually astute and forward-looking publication. ;-). Now they have some things to say about Net Neutrality:

Tiered System Obstructs Smaller Players

Eliminating net neutrality would turn the open system of the Internet on its head. With net neutrality, you can start a business selling widgets online and be assured that consumers can reach your Web site just as easily as Wal-Mart’s (NYSE:WMT – News). But under the tiered system proposed by the phone and cable companies, the level playing field is gone. Wal-Mart will be able to buy a spot in the fast lane on the information superhighway. The little guy will be stuck on dirt roads.

The phone and cable companies say they need to discriminate to generate a new revenue stream — which they claim will be used to improve infrastructure. It’s unclear whether these new tolls would actually generate substantial income. But eliminating net neutrality would allow these companies to use the power of discrimination to favor their own content — that is, they would use their domination of the broadband access market to exert power over the content and applications market.

And there’s no guarantee that they would reinvest the funds from this new revenue stream in faster broadband. In fact, the broadband providers would even gain incentive to delay deployment of faster networks. If the “pipes” were “fatter,” there would be no need for tiering. Thus, the providers have a strong incentive to reduce output — the precise outcome you’d expect in a duopoly market.

Proposed Bill Supports Consumer Preference

The FTC couldn’t deny that the public likes the free and open Internet the way it is. Their report admits: “In the area of broadband Internet access, (consumers) have revealed a strong preference for the current open access to Internet content and applications.”

Nevertheless, the FTC stuck its head in the sand. That leaves it to Congress to take decisive action to protect the free and open Internet and bring the benefits of broadband to everyone. The bipartisan Internet Freedom Preservation Act, introduced by Senators Byron Dorgan (D-N.D.) and Olympia Snowe (R-Me.), is a good start.

Perhaps Congress should keep in mind that those consumers are also voters.

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