Heritage Foundation Leadership for America

Background:  “Network neutrality” is the principle that Internet network providers, such as telephone and cable TV companies, should treat all Internet content equally. Under this principle, operators of the physical infrastructure of the Internet (as opposed to applications and content providers) would not be able to either block or give priority treatment to any specific types of Internet transmissions.

Status:   Long just a theoretical concept, legislation is now pending in Congress to codify the “network neutrality” as a binding rule. The most far-reaching is “The Internet Non-Discrimination Act of 2006,” by Sen. Ron Wyden (D-OR), which would ban most differentiation among types of content by providers. Legislation is also being considered in the House and may be attached to more general telecommunications reform bills being considered there.

Discussion:  At first glance, “network neutrality” may seem an unobjectionable principle. Who, after all, would want their telephone company to keep them from accessing CNN.com, or force them to use one the provider owns?  However, in practice, no major operator has ever blocked sites, and likely never will. The reason is competition: operators know that if they don’t give consumers what they want, those consumers will go to a competing provider. 

What is really at issue is the ability of providers to differentiate among content in other ways, for more beneficial purposes. For instance, voice-over Internet providers may want to pay to ensure high-quality transmissions, rather than hope for the best under the current “first come, first served” transmission system. 

Differentiation could also encourage much needed investment in networks. Telephone companies, for instance, are now spending billions of dollars to upgrade networks so that they can provide television service – in competition to existing cable TV providers. But that investment would be discouraged if the extra capacity thus created had to be shared with all others on a first-come first-served basis. In addition, strict anti-differentiation rules could keep network operators from protecting their customers from viruses, spam and other threats.

Proponents say that legislation can be written to allow beneficial differentiation, while stopping other types. But, inevitably, regulators would be drawn into endless disputes over whether this or that action is allowed or banned, and even what prices could be charged. This would be a bonanza for lobbyists and lawyers, but hurt innovation, investment and Internet users.

Action item:  Proposals to impose “network neutrality” regulations on the Internet should be rejected. Instead, policymakers should work to expand further competition among network operators in order to protect consumers.

This brief was prepared by Heritage Research Fellow James L. Gattuso.

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