Internet 3.0: Identifying Problems and Solutions to the Network Neutrality Debate

Abstract:     
What Internet Service Providers ("ISPs") can and cannot do to diversify services lies at the core of the debate over network neutrality. In prior generations ISPs had little incentive or technological capability to deviate from plain vanilla best efforts routing for content providers and from standard "all you can eat" subscription terms for consumer access to the World Wide Web. The next generation Internet has the technological capability and ISPs have the commercial motivation to offer "better than best efforts" routing and premium services for both content providers and consumers seeking higher quality of service and more reliable traffic delivery.

However the potential exists for carriers operating the major networks used to switch and route bitstreams to go beyond satisfying diverse requirements of content provider and endusers. Network neutrality advocates worry that major ISPs have both the wherewithal and incentive to bifurcate the Internet into one medium increasingly prone to congestion and declining reliability and one offering superior performance and potential competitive advantages to users able and willing to pay, or affiliated with an ISP operating a major bitstream transmission network such as AT&T, Verizon and Comcast. Opponents refuse to see a current or prospective problem and worry that network neutrality requirements legitimizes common carrier regulation of the Internet, a regulatory regime heretofore limited to telecommunications services operating in a less than fully competitive environment.

This paper will examine the network neutrality debate with an eye toward refuting and dismissing the many false and misleading claims and concentrating on the real problems occasioned by the Internet's third evolution. The paper accepts as necessary and proper many types of price and quality of service discrimination. However the paper identifies other types of hidden and harmful discrimination. The paper concludes with an identification of best practices in "good" discrimination that should satisfy most network neutrality goals without creating disincentives that might dissuade ISPs from building the infrastructure needed for Internet 3.0 services.

Keywords: network neutrality, Internet, next generation networks, new media

JEL Classifications: L86, L96, L98, O32

Working Paper Series