Institute Slams Net Neutrality Legislation

By Wayne Rash  |  Posted 2006-06-20 Email Print this article Print

The proposed changes will hurt consumers, says ACI, a public policy group.

WASHINGTON—Saying that proposed changes to the telecom bill currently working its way through the U.S. Senate will hurt consumers, the American Consumer Institute has announced that it's pressing senators to leave any regulatory provisions out of their legislation.

The public policy group, which studies a wide range of consumer issues, presented an economic study by Dr. Larry Darby, a former chief economist for the FCC, that said that current proposals for regulating payment for the Internet would make consumers pay the whole cost of upgrading and operating the Internet, while the companies that benefit the most, such as Google and Microsoft, would be given what is essentially a free ride.

Darby presented his study by pointing out that net neutrality has lost any meaning because the term has been hijacked by a number of competing interests, some of which have opposite points of view.

As a result, he said, he couldn't back net neutrality in any of its forms.

He did say, however, that proposed changes to the rate structure of the Internet would put consumers in an unfavorable situation.

The reason, according to Darby, is that broadband services, as well as content provisioning services, are what Darby calls a multi-sided market.

This is an economic state in which all parties to a transaction gain something, and no one side is responsible for the full cost.

In an interview today with eWEEK, Darby compared multi-side markets with how the broadcasting or newspaper businesses work.

He said they provide information that benefits consumers, and also advertising that benefits the publisher and the ad-buyers.

Read more here about proposed alternatives to net neutrality.

As a result, no one side pays the full cost, and in many instances the consumers receive the product of service for free.

"An Internet service provider that provides the infrastructure is in a multi-sided market," Darby said.

"It is providing access to me, but it is also providing a valuable service because it provides access to content providers and various enablers."

Darby said that because the content providers get to sell advertising and other services, both sides benefit.

But he said that the net neutrality arguments are different since most of the proposals for changing the net neutrality portion of the telecom bill would include price regulation.

"For a set of beneficiaries in a multisided market to say that only consumers should pay for it flies in the face of reality of the rest of how the economy actually price services," Darby said.

Read the full story on Institute Slams Net Neutrality Legislation

Wayne Rash Wayne Rash is a Senior Analyst for eWEEK Labs and runs the magazine's Washington Bureau. Prior to joining eWEEK as a Senior Writer on wireless technology, he was a Senior Contributing Editor and previously a Senior Analyst in the InfoWorld Test Center. He was also a reviewer for Federal Computer Week and Information Security Magazine. Previously, he ran the reviews and events departments at CMP's InternetWeek.

He is a retired naval officer, a former principal at American Management Systems and a long-time columnist for Byte Magazine. He is a regular contributor to Plane & Pilot Magazine and The Washington Post.

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