Net Neutrality Couched As A Competitiveness Issue
By Heather Greenfield
National Journal Tech Daily
September 14, 2006

Some people have debated the fairness of a marketplace that could let Internet providers charge some Internet sites more for faster service. But a new report from the technology group AeA examined network neutrality, which would ensure equal treatment on high-speed networks, as a competitiveness issue. In August 2005, the FCC relaxed rules against cable and telecommunication companies wanting to create fast and slow lanes on the Internet. Congress has been debating whether to reinstate such net neutrality rules as part of a telecommunications overhaul.

The new AeA report warns that weak net neutrality rules could promote anticompetitive behavior "if network operators implement exclusive or preferential deals or if they use this tiered system to push their own content to the front of the line."

AeA said that as other countries attract business because of cheaper labor, U.S. competitiveness depends on innovation. Matthew Kazmierczak, AeA's vice president of research and industry analysis, said other nations would have an edge if net neutrality does not become U.S. law because small innovators abroad would be on a more level playing field with existing companies on the Internet.

"Other countries handle this in the way the Internet has always operated -- content neutrality," Kazmierczak said.

Under the tiered system, a company like Verizon Communications could cut a deal with Goggle for faster service. Consumers who use digital subscriber lines from Verizon for broadband access then may find it faster to search Goggle than Yahoo or Microsoft's search engines.

"If someone is pushed to the front of the line, someone is pushed to the back of the line," Kazmierczak said. "Someone with a better product could get pushed to the back of the line."

While Yahoo probably could address the problem itself, Kazmierczak said such a system could distort the ability of a startup company to compete. He said an idea like the YouTube video-sharing site, which uses a lot of bandwidth, probably could not have started under a tiered pricing system. The system likely would favor a bigger, existing company like Microsoft trying to start a video-sharing service.

Kazmierczak said closed systems like cable or wireless simply do not have a lot of innovation on applications compared to open systems like the Internet.

"Two Stanford students building a search engine out of their dorm room would not have the resources to compete (and become Google)," the report said. "Nor could a Pez collector turn his girlfriend's hobby into an international corporation (and become eBay)."

But Ed Merlis, senior vice president of government and regulatory affairs for the U.S. Telecom Association, said he does not believe a consumer would use a search engine just because it is twice as fast. "If someone builds a better mouse trap, it may be the content, not the speed," Merlis said. "Speed is not the sole measure of quality."

Merlis argued that an innovative idea to allow an Internet movie or videogame service to boost bandwidth temporarily might not get off the ground if net neutrality rules are passed.