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CONTACT: David Fish
July 16, 2004
(202) 289-8928
FCC Broadband Neutrality Mandate a No-No
Study: Would Reinforce Concentration, Harm Competition

WASHINGTON D.C. - Calls for the Federal Communications Commission to issue 'neutrality' regulations preventing broadband network owners from using their supposed control over the 'last-mile' to discriminate against service providers and unaffiliated content and applications are mistaken and should be resisted, according to Vanderbilt Law School expert Christopher S. Yoo, who headlined a Washington policy conference today. In his study released by The Progress & Freedom Foundation - "The Economics of Net Neutrality: Why the Physical Layer of the Internet Should Not Be Regulated" - Yoo argues that intervention is unnecessary and would have "perverse" effects.

"The irony is that the types of intervention supported by proponents of network neutrality are likely to have the perverse effect of frustrating what should be the central focus of broadband policy by retarding, if not forestalling, the continuing emergence of greater competition at the physical layer," Yoo writes. "Compelled standardization runs the risk of reinforcing whatever short-run tendencies towards concentration that already may be extant in the broadband industry."

Mandating network neutrality "can have the perverse effect of dampening incentives to invest in the alternative network capacity that remains the only solution to the problems of broadband policy that is sustainable in the long run... [it] raises the real danger that regulation would become the source of, rather than the solution to, market failure," he writes. "Such considerations are particularly problematic when the industry is undergoing dynamic technological change, as is the case of broadband."

Yoo argues that neutrality proposals are "rooted in concerns about vertical integration" that are "more imaginary than real" and do not stand up to empirical analysis.

"Professor Yoo's paper is a solid, scholarly exposition of why regulatory separation mandates such as the so-called Net Neutrality proposal are unsound," says Randolph. May, senior fellow and director of communications policy studies at the Foundation. "Whether they go under the name of Structural Separation, Open Access, or Open Network Architecture, he explains why these prohibitions against integration impose real costs and stifle investment."

The Progress & Freedom Foundation is a market-oriented think tank that studies the digital revolution and its implications for public policy. It is a 501(c)(3) research & educational organization.



The Progress & Freedom Foundation