Only Connect

Abstract

There are two kinds of legal rules for communications networks, such as the Internet and the telephone system. Interconnection rules define how and when networks must exchange traffic with each other, and non-discrimination rules prevent networks from favoring some customers' traffic over others. Each approach has unique strengths and weaknesses. The distinction has never been fully appreciated, even though regulators have imposed both requirements many times.

Non-discrimination questions predominate in communications and Internet policy today, thanks to the high-profile battle over "network neutrality" rules for broadband networks. Yet both sides in the network neutrality debate are mistaken. The central challenge of our era of digital convergence is not non-discrimination, but interconnection. Technological and marketplace developments threaten to undermine the open connectivity that feeds the Internet's extraordinary dynamism. A renewed emphasis on interconnection could better address the concerns that animate the network neutrality debate. At the same time, it could avert a disastrous balkanization of the Internet, which otherwise looms as a real possibility.

In short, non-discrimination was crucial in the old era of scarcity; interconnection is the essential input of the new age of abundance. The central mandate for the emerging field of network infrastructure policy should be the one eloquently articulated by E.M. Forster: Only connect.

Keywords: Internet, telecommunications, convergence, interconnection, network neutrality, broadband

JEL Classification: L96, L98