Internet regulation, or net neutrality, would harm investment, says former official


At a luncheon event in Wichita, Bruce Mehlman of the Internet Innovation Alliance told an audience that increased regulation of the internet — the principle known as “net neutrality” — would harm capital investment in broadband internet service.

Mehlman was formerly Assistant Secretary of Commerce for Technology Policy and now serves as co-chairman of the Internet Innovation Alliance and as partner in a Washington lobbying firm.

Mehlman laid out some of the facts of broadband internet: all the varied things businesses and people do with the high-speed transmission of data, the fact that broadband internet has been rapidly adopted, and the rapid growth of digital content.

Today, 66 percent of American adults have a broadband internet connection at home. 95 percent have access to at least one broadband service offering, if they chose to subscribe.

He cited a just-released Pew Internet & American Life project which found that 21 percent of American adults do not use the internet. Of these non-users, 48 percent indicated lack of relevance, 21 percent cited price as the reason, 18 percent said it was usability that kept them offline, and only six percent said access was the reason why they don’t use the internet.

Mehlman said that these measurements are an indicator of the success of broadband internet adoption.

The big policy battle for 2010, Mehlman said, is net neutrality. The basic principle of net neutrality is that “companies providing Internet service should treat all sources of data equally,” according to the New York Times. Internet Service Providers (ISPs) would not be able to manage their networks in terms of providing faster service to those who agree to pay, and they would not be able to block any content.

Some of the things that net neutrality would do, Mehlman said, include the following: ISPs would have to be transparent with rules and policies, they would not block or degrade certain types of internet traffic, there would be government-defined “reasonable” network management, there would be no “express lanes,” and there would be limits on service tiers and pricing plans. These concepts would also be applied to wireless broadband service.

Advocates of net neutrality are particularly concerned that ISPs may block or slow service for some types of traffic. Mehlman provided three examples of attempts at this. In each case customers objected, and the ISP quickly reversed course.

He noted the irony of Google — a company that has been a leading advocate of net neutrality — objecting to the creation of preferred classes of internet traffic, when a major component of Google’s business model is customers paying for preferential treatment of their advertisements placed on Google.

Mehlman asked the audience to note the contrast between two heavily-regulated industries — telecommunications and cable TV — and a lightly regulated industry — information technology, which is the category that broadband internet and most information services fall into. Telecommunications and cable TV, throughout their history, have evolved slowly, and had exhibited little of the innovation that is characterized the internet and other information services.

A recent court decision ruled that the FCC had no authority to regulate information services. So the FCC now has two choices. One would be to persuade Congress to let the FCC regulate the internet. The other would be to redefine the internet from an information service to a telecommunication service, reclassifying it as a “Title II” service.

This last option has been described by industry analyst Craig Moffett as the “nuclear option.” The additional regulation that Title II designation brings would fuel investor uncertainty, and probably lead to a dramatic reduction in capital investment in broadband internet. Innovation would likely suffer.

The event was sponsored by Americans for Prosperity-Kansas, Mid-American Communications Alliance, Wichita Independent Business Association, and Kansas Policy Institute.


4 responses to “Internet regulation, or net neutrality, would harm investment, says former official”

  1. Eisenhower Republican

    Wow! You took it – Hook – Line and Sinker!!!!

    I thought you stood for individual freedom! Instead, you advocate a position that would allow MSN to negotiate with ISPs to give their news priority over smaller, less well known or fringe news services.

    A few years ago, I left a large well know ISP because they advertised Internet by XYZ and content by Yahoo!!’

    I’m old enough to determine my own content.

  2. Anonymous

    Let MSN negotiate with an ISP if they so want.
    Did someone redefine individual liberty recently to not include certain people’s business?

  3. Eisenhower Republican,

    Individual freedom is based on property rights. The speaker did not mention this, so I didn’t mention it in my article, but property rights provide a solution to this problem. The ISPs own their part of the internet, and as such, they have absolute right to do with it as they wish.

    Whether they make wise decisions, or whether customers like you get what they want, is a secondary matter.

  4. Smart About Investment…

    I found your entry interesting thus I’ve added a Trackback to it on my weblog :)…

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