Net neutrality won’t set the internet free

Last month the US regulator, the Federal Communications Commission (FCC), launched a proceeding to adopt rules intended to "preserve the open internet." One of the main aspects of the proposal is a rule that would require ISPs, including operators of cable, telephone, fibre and broadband wireless networks, to give equal treatment to all data and internet traffic carried over their networks. This concept is best known as "net neutrality".

This week, the European Parliament has finally passed the Telecoms Package. The legislation has taken two years to create and crucially does not propose net neutrality regulations, instead it allows a competitive broadband marketplace to be self-regulated through consumer choice. 

Proponents of net neutrality argue that allowing ISPs to use network management techniques undermines the principle of open and equal access that has always characterised the internet.

This view is shared by large online firms such as Google, who are keen to avoid the huge cost of the expanded networks and bandwidth capacity required for video and other emerging applications.

The parties in support of net neutrality want to treat access to the internet as a constitutional right where the end-user is unaffected by the activities of the companies that make the service possible.

If regulation enforcing net neutrality prohibits different service levels being offered, the web’s value will diminish. It is better for all, especially consumers concerned about affordability that firms that impose a greater cost on the network should pick up the costs.

Net neutrality would create a loophole that allows large-content firms to avoid paying to deploy these networks to users.

Consumers are benefiting from competition, investment and innovation owing to the deployment of broadband networks because the internet has been largely free from burdensome and expensive government regulations. ISPs need to be able to prioritise data to provide the level of service demanded by customers for these essential functions.

The FCC decision could greatly affect the broadband landscape in the US if net neutrality comes into effect.

By regulating the very parties responsible for the internet's plumbing, the US government will be hindering innovation and crucial investment in the networks that support online and wireless activity. It is encouraging to see that the EU has not fallen into the same trap as the FCC in its discussions around the Telecoms Package.

As a result, the broadband landscape in Europe and the US could look very different in five years time with the latter suffering from less competition, greater dominance by companies like Google and Skype and a decline in web innovation.

Securing investment in high capacity networks relies on the existence of a policy framework that is supportive of investment. Any sort of interventionist policy - such as that being proposed by the FCC - will deter private sector investment in super fast broadband.

In Europe, most policy makers seem to think that the need for net neutrality legislation is unproven and remain focused on accomplishing the most important broadband objective – investment and deployment of next-generation networks. This will be critical to the  European economic recovery.

Ultimately the best way for countries to bring new services to market, open up the internet to as wide an audience as possible and offer value to its customers in both wireless and fixed line services, is to encourage market competition as opposed to over-regulation.

Martin Cave is a leading telecoms economist and director of the Centre for Management under Regulation at Warwick Business School