Network Neutrality between False Positives and False Negatives: Introducing a European Approach to American Broadband Markets

Abstract

Network neutrality has become a contentious issue both in Europe and the US. Regulators on both sides of the Atlantic face digital divides in their society, and are confronted with the potentially conflicting policy goals to incentivize private investment in next generation broadband, while maintaining ‘neutral’ and competitive broadband networks.

This article compares nascent American and European network neutrality policy in terms of regulatory error costs. Emerging markets such as broadband are more likely to be affected by regulatory errors, and these errors have graver consequences in emerging markets than in conventional markets. US telecommunications policy traditionally has advanced a trial-and-error approach of categorical intervention against specific regulatory errors. However, analysis shows that categorical regulation misrepresents the complexity of network neutrality and emerging broadband markets. European telecommunications policy on the other hand may have the potential to employ a dynamic regulatory mechanism that allows for targeting more regulatory errors at once, but fails to live up to this promise with network neutrality.

Therefore, this article recommends US policymakers to develop an analytic and dynamic regulatory model for network neutrality, which builds on European precedent yet learns from European regulatory mistakes. A practical reform scenario suggests such a model is best implemented by the FCC, which has the opportunity to draft a comprehensive National Broadband Plan under the Stimulus Act. With its National Broadband Plan, the FCC should position itself to monitor broadband markets, and deal with network neutrality in a flexible and transparent manner.

Keywords: network neutrality, telecommunications, broadband, antitrust, regulation, error costs, comparative law

JEL Classification: K21, K23, L4, L5, L96