The Economics of Network Neutrality: Are 'Prophylactic' Remedies to Nonproblems Needed?

Abstract

The Federal Communications Commission recently implemented rules to promote “network neutrality.” This paper attempts to answer three questions concerning these rules: (1) What economic problem do the rules supposedly address? What does economic theory indicate about the risks of “non-neutral” broadband Internet service? And (3), what does empirical political economy suggest is the likely outcome of the new rules? The article concludes that economic analysis does not support network neutrality regulation, in part because there is little evidence of “bad behavior” prior to the rules’ implementation. However, the rules themselves provide opportunity for industry mischief, which is already occurring.