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CONTACT: Amy Smorodin
February 7, 2006
(202) 289-8928
Net Neutrality Mandate Would Harm Innovation
PFF's Dixon Testifies Before Senate Commerce Committee

WASHINGTON D.C. - Net neutrality mandates would ultimately hurt broadband investment and innovation, stated Kyle Dixon, PFF Senior Fellow and Director of the Federal Institute for Regulatory Law and Economics, in testimony presented today before the Senate Committee on Commerce, Science and Transportation. In his testimony, Dixon stated that such a mandate would worsen conditions faced by application and content providers and would harm investment and innovation in networks. In lieu of such a mandate, Dixon suggests Congress should rely on antitrust enforcement or competitiveness standards in clear cases of market power abuse.

Dixon warned that when considering the need for a network neutrality mandate, lawmakers should keep in mind the current state of consumer welfare in the broadband market. Dixon stated the "expansion of consumer benefits depends on maintaining healthy prospects for each of the Internet's components," including users, network providers and content developers. Dixon cited the growth of applications on broadband networks currently free of neutrality mandates as proof that such mandates are not needed. Competition among broadband providers and emerging communications technologies, Dixon explained, make such mandates unnecessary.

In his testimony, Dixon explained that network neutrality mandates would undermine investment and innovation in broadband networks. Dixon cites three reasons for such an impediment:

  • Ambiguities regarding what "network neutrality" actually means would burden and delay new broadband services and networks.
  • Enacting a network neutrality mandate would push consumers and the industry down a "slippery slope" towards more burdensome regulation.
  • A network neutrality mandate would undermine broadband deployment by deterring providers from addressing Internet reliability and security concerns.

Dixon further stated that network neutrality mandates could impede the development of content and applications. He views the current level of competition in the market as insurance that network providers are unlikely to prohibit content and applications because they would "risk losing existing or future customers to other networks." Moreover, the current architecture of the Internet stands as an impediment to certain applications, such as streaming video, and leaves users open to security threats, such as viruses and worms. If a network neutrality mandate was implemented, broadband providers would be deterred from offering some services and security measures on private networks.

Finally, Dixon suggested that market power alternatives must be explored as an alternate solution for protecting consumer welfare in the broadband market. Dixon stated that any market power alternative should incorporate two key concepts: "First the alternative should be narrowly targeted to specific instances of market power, in terms of both the geographic scope and behavioral requirements of the remedy. Second, the alternative should incorporate a rigorous competitive standard and evidentiary showing to ensure that neutrality mandates are imposed only to remedy demonstrable cases of market power abuse."

In closing, Dixon urged Congress to use caution when considering a network neutrality mandate, a decision that will affect millions of US citizens. "In order to further this central goal of communications regulation, I urge Congress to remain cautious about imposing a network neutrality mandate at this early stage in the development of the broadband Internet. Imposing 'neutrality' where it is not necessary to remedy abuses of market power could be far more damaging than endorsing a 'solution in search of a problem.' Doing so could make a network neutrality mandate itself the problem." Dixon's testimony is available on the PFF web site.

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.



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