Net Neutrality or Minimum Quality Standards: Network Effects vs. Market Power Justifications

21 Pages Posted: 8 Jun 2010  

Tim Brennan

University of Maryland, Baltimore County - Department of Public Policy; Resources for the Future

Date Written: June 8, 2010

Abstract

Net neutrality - all bits should be treated identically by broadband Internet service providers regardless of source - is hotly debated. Proponents find adequate competition among broadband providers to prevent harm from content-based discrimination. Opponents find such regulation premature or unnecessary, noting that uniform treatment precludes higher quality services and effective congestion management. Both sides neglect network externalities - the value of broadband to each content provider depends on the expected quality of links to others’ content. Competition could exacerbate this, as each provider fails to internalize the network externality. This suggests an alternative approach - a minimum quality of service standard. This addresses underlying concerns at far lower cost than net neutrality, while fostering innovation by allowing providers to offer higher quality service and manage congestion, with the ancillary benefit of protecting potential speech rights of content providers. Ex post antitrust remedies will not be available if judicial limits on FCC authority remain.

Keywords: Net Neutrality, Telecommunications Policy, Network Effects, Regulation

JEL Classification: L96, L51, K20

Suggested Citation

Brennan, Tim, Net Neutrality or Minimum Quality Standards: Network Effects vs. Market Power Justifications (June 8, 2010). Available at SSRN: https://ssrn.com/abstract=1622226 or http://dx.doi.org/10.2139/ssrn.1622226

Tim Brennan (Contact Author)

University of Maryland, Baltimore County - Department of Public Policy ( email )

1000 Hilltop Circle
Baltimore, MD 21250
United States
410-455-3229 (Phone)
410-455-1172 (Fax)

Resources for the Future ( email )

1616 P Street, NW
Washington, DC 20036
United States

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