Network Neutrality, Search Neutrality, and the Never-Ending Conflict between Efficiency and Fairness in Markets

Abstract:     
Network neutrality as such may fade from public interest discussions, but historical precedents going back for centuries argue that the underlying issues will continue to be debated. Those issues revolve around the basic tension between efficiency and fairness in markets, a tension that has never been completely resolved. Further, this tension is unlikely to ever be resolved, since our well-documented inability to predict the development of technology and its impact on society mean that no fixed set of rules can work indefinitely.

Should net neutrality or some similar set of rules come to dominate (either because of market forces, or through regulation), attention would likely turn to other parts of the economy that might be perceived as choke points for social, economic, and political activities. If Net search becomes as important as the Google stock price seems to imply, for example, it might be the focal point for such concerns.

Future controversies are of course matters of speculation. On the other hand, net neutrality and its close relatives, such as common carriage for the Internet, are current issues that have to be decided soon. What appears to be missing in the current debate is a discussion supported by reliable data of the basic fundamental economic question, namely whether a net neutral communication infrastructure can be viable. And if it is not, just how far from net neutrality is it necessary to move? Should pricing for Internet access be dependent on the income of the user, for example?

There are arguments that a net neutral communication infrastructure should be viable. But to get there would require a major restructuring of the industry. The prospects of that are tied up not just with politics, but also with some of the great paradoxes of the current financial markets.

It is possible to argue that the best outcome might be to have Google defeat AT&T in the battle over net neutrality, but then (and likely in any case) society might have to get ready to regulate Google!

Keywords: network neutrality, common carriage, structural separtion, network myths

JEL Classifications: D40, D63, K23, L96

Working Paper Series