Net Neutrality: Economic Evaluation Of Market Developments

On February 26, 2015, the Federal Communications Commission (FCC) issued new regulations for the Internet. A significant stated motivation for these regulations was the protection and promotion of the quality of Internet service. This article provides information about the evolution of the quality of Internet service, providing context for this central stated motivation of Internet regulation, including the merits of rules restricting payments by content providers for priority treatment of certain Internet traffic. The history of the FCC's Internet regulations (or lack thereof) is reviewed, the main arguments for and against imposing ex ante price regulation on Internet Service Providers (ISPs) are outlined, and data on industry performance, particularly subscribership levels in general and at substantially increasing speeds, are described. This experience indicates that apparent insufficiencies in competitive alternatives at the fastest available speeds have been ameliorated in fairly short order by new offerings by multiple ISPs. These findings strongly suggest that basing new restrictions on a putative dearth of competition for recently available service levels and transmission speeds is likely to be overtaken by technological and market developments, rendering such ex ante rules at best superfluous and at worst counterproductive to competition and innovation.