46 Pages Posted: 14 Apr 2008 Last revised: 21 Apr 2013
This Article examines zero-price regulation, the major distinguishing feature of many modern network neutrality proposals. A zero-price rule prohibits a broadband Internet access provider from charging an application or content provider (collectively, content provider) to send information to consumers. The Article differentiates two access provider strategies thought to justify a zero-price rule. Exclusion is anticompetitive behavior that harms a content provider to favor its rival. Extraction is a toll imposed upon content providers to raise revenue. Neither strategy raises policy concerns that justify implementation of a broad zero-price rule. First, there is no economic exclusion argument that justifies the zero-price rule as a general matter, given existing legal protections against exclusion. A stronger but narrow argument for regulation exists in certain cases in which the output of social producers, such as Wikipedia, competes with ordinary market-produced content. Second, prohibiting direct extraction is undesirable and counterproductive, in part because it induces costly and unregulated indirect extraction. I conclude, therefore, that recent calls for broad-based zero-price regulation are mistaken.
Keywords: Antitrust, broadband, cable, Carterfone, common carriage, deregulation, discrimination, DSL, FCC, federal communications commission, infrastructure, Internet, net neutrality, network neutrality, price discrimination, telecommunications, vertical, VoIP, voice-over-IP
Suggested Citation: Suggested Citation
Hemphill, C. Scott, Network Neutrality and the False Promise of Zero-Price Regulation. Columbia Law and Economics Working Paper No. 331. Available at SSRN: https://ssrn.com/abstract=1119982 or http://dx.doi.org/10.2139/ssrn.1119982
By Tim Wu
By J. Sidak