FTC Report Cautions Against Network Neutrality Laws

By Roy Mark

June 27, 2007

Agency concludes existing laws and market conditions suggest new network discrimination rules are unnecessary.

Lawmakers should proceed "very cautiously" in considering the imposition of network neutrality rules on broadband carriers, according to a new report published today by the Federal Trade Commission (FTC).

The 170-page FTC staff report is end work of the Internet Access Task Force, which was organized in August 2006 to investigate what FTC Chairman Deborah Platt Majoris calls the "most hotly debated issue in communications."

According to the report, the FTC was unable to find any significant market failure or demonstrated consumer harm from conduct by broadband providers.

"Policy makers should be wary of calls for network neutrality regulation simply because we do not know what the net effects of potential conduct by broadband providers will be on consumers," the report states. "Similarly, we do not know what net effects regulation to proscribe such conduct would have on consumers."

The report adds, "This is the inherent difficulty in regulating based on concerns about conduct that has not occurred, especially in a dynamic marketplace."

In a statement issued with the report, Majoris said, "Policy makers should be particularly hesitant to enact new regulation in this area."

The network neutrality issue has roiled consumer and public policy advocates since AT&T proposed charging content and application providers extra fees based on their bandwidth usage. Critics claim the practice would amount to price discrimination and encourage incumbent broadband carriers to cut preferential deals on delivering content to consumers.

In the 109th Congress, Democrat-sponsored efforts to pass network neutrality laws were defeated by Republicans who claimed the issue was a solution in search of a problem. In the Democrat-controlled 110th Congress, a similar bill calling for network neutrality has been introduced but no votes have been taken.

The Federal Communications Commission (FCC) is also conducting a study on network neutrality to supplement its current "principles" prohibiting network discrimination.

"Policy makers should be wary of enacting regulation solely to prevent prospective harm to consumer welfare," the FTC report states, noting discriminatory practices are already regulated by the FTC and the Federal Communications Commission.

The report concludes that a "young and evolving" broadband market will hedge network discrimination fears because it is "moving in the direction of more – not less – competition." Cable and telephone companies currently control 98 percent of the U.S. broadband connections.

The FTC report brought both jeers and cheers from both sides of the issue.

"On fourth down with the future of the Internet on the line, the FTC decided to punt," S. Derek Turner of the Save the Internet Coalition said in a statement. "While the FTC rightly acknowledges that consumers strongly prefer the free and open Internet the way it is, much of the agency's lengthy new report largely ignores our broadband reality."

Turner dismissed the FTC's conclusion of growing competition in the broadband market. "The same phone and cable companies whose anti-competitive policies created this sorry situation are now proposing to become gatekeepers over Internet content and services. But the FTC seems content to stand on the sidelines."

But the Hands Off the Internet Coalition praised the report.

"Once again, independent experts have looked at the net neutrality issue and asked, 'Where’s the beef?'" the group said in a statement. "There's an explosion in broadband deployment in America now, which is creating jobs and making high-speed connections more affordable. With consumer protection laws already in place, this is no time for government to raise prices with heavy net neutrality regulation."



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