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CONTACT: Amy Smorodin
March 30 , 2006
(202) 289-8928

Incorporate Competition Standard in "Net Neutrality"
PFF's May Testifies Before U.S. House Energy and Commerce Committee

WASHINGTON D.C. - In light of widespread competition in the communications industry, any language addressing network neutrality in the "Communications Opportunity, Promotion and Enhancement Act of 2006" should incorporate an unfair competition standard in order to avoid the likely imposition of a general common carrier obligation on all broadband providers, stated Randolph May in testimony presented to the U.S. House Committee on Energy and Commerce. In addition, May praised the proposed creation of national franchising for the cable industry but urged the Committee to further reduce regulatory requirements, specifically concerning content regulation.

In his testimony, May, Senior Fellow and Director of Communications Policy Studies at The Progress & Freedom Foundation, explained that "it is far preferable for Congress not to enact into law any specific net neutrality provision mandating access rights and non-discrimination obligations." May reasoned that it would not be in the best interest of providers to block access to services that customers value because, in an environment of increased competition, the customers would switch providers. He also stated that the ability for providers to differentiate themselves from their competitors drives investment in networks. If Congress nevertheless is intent on adopting a specific net neutrality provision, May continued, "the committee should revise the broadband section to provide that the FCC may find a violation of the broadband principles only if it finds that the broadband operator has committed an unfair competitive practice." May explained that the standard for identifying unfair competitive practices in such cases should be based on the rigorous market-oriented competition analysis like that used by the Federal Trade Commission and the Department of Justice in enforcing the antitrust laws.

In his analysis of the video competition section of the bill, May praised the creation of national franchises without mention of build-out requirements as a positive step towards even more increased competition in the video marketplace. Still, he questioned the need for government mandates that require cable companies to carry particular types of programming when other media platforms are not required to conform to similar mandates. Also, May suggested that the Committee's deliberations concerning obligations imposed on broadband video providers should be informed by constitutional considerations, citing free speech concerns and violation of private property rights.

With his submitted written testimony, May included a statement on network neutrality released last week by the Digital Age Communications Act (DACA) Regulatory Framework Working Group. The statement from the Working Group says its proposed institutional framework, tied to adjudication and ex post remedies, is preferable to the broad net neutrality mandates. The group states that a case-by-case competition-based approach is preferable to a broad Net Neutrality mandate as such mandate would likely to stifle investment in new networks and innovative services and harm consumer welfare.

In addition his points outline above, May also urged Congress to include three concepts in communications legislation going forward. These are: "alteration of the division of jurisdictional authority that recognizes the increasingly national and international nature of communications; reform of the universal service system of subsidies that recognizes the extent to which consumers in rural areas and low income consumers have opportunities to avail themselves of new, lower-cost communications technologies than those traditionally supported by the subsidies; and reform of spectrum policy that continues on a course that recognizes that increased flexibility of use and more secure property-like rights leads to more efficient and consumer-welfare enhancing use of this valuable resource."

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