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Who Gets to Innovate?

The Question at the Heart of the Net-Neutrality Debate

On November 20 the Federal Communications Commission’s, or FCC, new net-neutrality rules went into effect, formalizing the principles of network freedom that have dictated Internet access since the dawn of the information age. While we’ve already covered the basic tenets of net neutrality here on Science Progress, challenges to FCC rules in the courts and on the floor of the Senate have pushed the net-neutrality debate back to the forefront.

The FCC’s new net-neutrality rules outline three basic points of compliance for Internet Service Providers, or ISPs:

1. “Transparency. Fixed and mobile broadband providers must disclose the network management practices, performance characteristics, and terms and conditions of their broadband services.”
2. “No blocking. Fixed broadband providers may not block lawful content, applications, services, or non-harmful devices; mobile broadband providers may not block lawful websites, or block applications that compete with their voice or video telephony services.”
3. “No unreasonable discrimination. Fixed broadband providers may not unreasonably discriminate in transmitting lawful network traffic.”

If on the surface these rules seem rather benign, it’s because they are: Net-neutrality proponents were dismayed upon their initial announcement due to their leniency. The rules cover only the bare minimum of net neutrality and provide leeway for disclosed network-management practices, in addition to allowing mobile broadband exemptions in many cases. These exemptions led to at least one public-interest lawsuit complaining the rules are “too weak” on mobile broadband protections, showing clearly the rules are not an unrepentant love letter to net-neutrality activists.

And yet the rules have been blasted by the telecom industry since they were announced a year ago, with Verizon filing a suit claiming the FCC has no authority to implement the rules. The FCC’s opponents take a hyperbolic cue from Glenn Beck—who is on the record proclaiming net neutrality will “destroy the free market that created the Internet”—arguing net neutrality stifles the incentive to innovate by limiting the avenues for possible profits. This argument extends to suggest ISPs are entitled to profit from tiered access and content discrimination to offset the costs of creating and maintaining network infrastructure.

Unfortunately for opponents, their argument stands on a shaky foundation. The Internet did not spring from the free market, nor has private industry solely shouldered the financial obligations of creating and maintaining network infrastructure: The Internet we know today emerged from the ARPANET project, funded by the Department of Defense, and the federal government has heavily invested in broadband infrastructure through programs such as the Broadband Initiatives Program. This is not to say ISPs should have no right to maintain their networks and ensure they are working to the benefit of themselves and their consumers—indeed, this is very argument for the flexibility regarding network management practices clearly outlined in the regulations. But by citing innovation as the reason they should maintain de facto control of the Internet, opponents of net neutrality have unsheathed a double-edged sword.

Many net-neutrality proponents argue that an open Internet actually allows for the ultimate free market, spurring innovation across the economy, and not just for a few large companies. Allowing ISPs to control consumer access would fundamentally undermine the ability of consumers and content providers to compete in the information economy. Nicholas Economides, professor of economics at NYU Stern School of Business and executive director of the NET Institute, explains:

The Internet’s design allows businesses and consumers connecting to it (“at the edge” of the network) to innovate without obtaining approval from network operators. As a result, all innovation that is expected to yield benefits greater than its costs can occur; this is different than in a centrally controlled network where innovation at the edge would be restricted by the network operator based solely on whether the innovation brought profits to the network operator rather than whether the benefits of the innovation to the whole society exceeded its costs. This unleashes a huge potential for innovation.

This huge potential for innovation is available because of the unique openness enabled by net neutrality. An open Internet allows innovative entrepreneurs to be able to reach a vast audience of potential customers at minimal cost and compete in established niches. Driven purely by consumer interest and demand, small startups like eBay, Amazon, and Google were able to flourish based on the quality of their products. If ISPs are permitted to charge web-content providers for different tiers of service, small businesses, independent artists, and those who can’t afford preferential treatment will all be left behind—and with cable companies and telecommunications providers already teetering dangerously close to the edge of forming Internet access cartels, this is not a mere threat, but a very real possibility in the upcoming decades. The economic argument for net neutrality is simple: It is the level playing field the next Skype or Facebook needs in order to compete.

When Sen. Maria Cantwell (D-WA) ended her remarks in support of the FCC rules in the Senate in November, she called on her colleagues to “make sure that it stands until we can even get stronger Internet freedom protection.” Perhaps that is where we should be: with the FCC’s moderate net-neutrality rules as a compromise while our society continues the dialogue. Net neutrality is both a technically and ideologically complex issue where both sides have clear agendas—although the contributions of telecom industries to members of Congress’ campaign coffers would seem to suggest their agenda is better funded.

Telecom industries are not inherently evil for working to maximize profits for their shareholders, nor are net-neutrality advocates Marxists for fighting to maintain a status quo that allows for consistent content access across providers—to define either side in such black and white terms does a disservice to both—but at the end of the day, modest net-neutrality rules provide protection for consumer choice and preserve the Internet as a space for economic growth through innovation.

 Andrea Peterson is an Assistant Editor at American Progress, Lauren Simenauer was an intern with Science Progress.

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