Finding IP Value

Some Neutral Perspectives on “Net Neutrality”

By Mark Vorder-Bruegge

In less than thirty years, the Internet has evolved from a small consortium of military and educational research offices into a world-wide public system for communication, information-sharing, and business with millions of content providers such as Netflix and CBS News, thousands of connection service providers (ISPs) such as Comcast and AT&T, and billions of business and consumer customers, including you and me.

Net NeutralityThe phrases Net Neutrality and Open Internet are public policy labels used by the U.S. government to focus on some specific business practices applied to content providers by connection service providers (ISPs).

Earlier this year, the Federal Communications Commission (FCC) announced that it had greatly advanced the federal government’s Net Neutrality policy by adopting new regulations regarding telecommunication and information services.  These new regulations essentially control the ability of ISPs to apply variable pricing to content providers based upon the size and speed of the data flows they stream into the Internet for ultimate delivery to the ISPs’ business and consumer customers. As a simple example, if the movies and TV shows fed into the Internet by Netflix contain much larger quantities of data than content from CBS News, the FCC is asserting the power to prevent an ISP like Comcast from charging Netflix more than it does CBS, or slowing down Netflix’s data if it declines to pay more.

The courts have struck down FCC regulations like this in the past, and the ISPs are certain to attack these new regulations.  The businesses and consumers, which are the ISPs’ ultimate customers, should care about the fate of the Net Neutrality regulations because they will affect the prices charged for content.

But the bigger question is whether the Net Neutrality policy in its current form actually addresses what matters most to Internet users: fast, economical, and reliable service.

If the ISP’s are allowed to impose higher costs on high-volume content providers, these providers almost certainly will pass those costs on to you and me, as content consumers. On the other hand, if the ISPs are prevented from collecting more money from high-volume providers, it is almost certain that the ISPs will simply pass any increased data transport costs on to their ultimate business and consumer customers – also you and me — in the form of higher fees.  The FCC has announced that it does not intend to regulate ISP services to ultimate customers.  But most importantly,  the government’s current Net Neutrality recipe does nothing to address poor Internet connection speeds, inflated service charges, obsolete equipment, and abysmal customer support suffered by business and consumer ISP customers in many U.S. communities.

In a perfect world, profit incentives would motivate the ISPs to innovate, invest in necessary infrastructure, and compete vigorously on price and service quality.  A small number of U.S. communities such as Kansas City are beginning to enjoy this kind of service from entirely new ISP market entrants with loads of capital such as Google.  There are exciting new economic drivers in this area. For example, Google can make more money when data moves faster, even without any increase in customer pricing.  But this kind of progress requires competition.

Too many U.S. markets are like Memphis where cable that was installed years ago for television service – along with other legacy infrastructure such as land lines – still permits a monopolistic, take-it-or-leave-it attitude on the part of entrenched ISP’s.

The other societal tools for potential achievement of ISP competition are public incentives, regulation, or a rational combination of both.  These have been successful in many European and Asian countries where Internet downloads occur hundreds of times faster, and service is cheaper or free. The Obama administration has identified numerous specific policy tools for this purpose, such as tax incentives for new customer connection infrastructure.  But the majority of the President’s speeches and publications on these policy tools do not even mention Net Neutrality.

Because the FCC Net Neutrality regulations do not address ISP behavior toward ultimate customers, they continue to dodge our greatest need:  fast, economical and reliable Internet access.

*This article, under a different headline, first appeared in the June 14th issue of The Commercial Appeal.


Mark Vorder-Bruegge, Jr.
Mark Vorder-Bruegge is a member of Wyatt’s Intellectual Property Protection & Litigation Service Team.  He also is a member of the Firm’s Executive Committee and serves as the Firm’s General Counsel.  Mark concentrates his practice in client counseling, resolution, and trial of complex problems of intellectual property, corporate governance, accounting and securities fraud, professional liability, and other business disputes. Read More