Competition and Antitrust Law Can Protect The Internet

Robert Hahn and
Robert Hahn
Robert Hahn Director of Economics - Smith School of Enterprise and the Environment at the University of Oxford, Former Brookings Expert
Robert E. Litan

October 3, 2006

If you doubt the effectiveness of simple slogans, the current debate over net neutrality should change your mind. As the heat of the rhetoric rises, the quality of the information has declined.

The “net neutrality” controversy centers on whether firms providing higher speed broadband should be allowed to charge both the content providers and consumers for faster, more reliable service-pitting Silicon Valley firms like Google and eBay against the telecommunications and cable industries (which rarely find themselves on the same side, this being a notable exception).

On examination, however, one truth is clear—while both sides are prone to hyperbole and exaggeration, net neutrality enthusiasts are also just plain wrong. And the error is dangerous. If the net neutrality proponents prevail, it is less likely that phone and cable companies that operate most of the Internet pipes will have sufficient economic incentives to build needed new capacity.

Net neutrality enthusiasts believe that if Internet service providers are allowed to charge content providers like, they will block web sites for their own private gain—thus crippling the Internet. Those opposing net neutrality assert the opposite—that pricing freedom is the key to Internet innovation and the deployment of the expanded networks needed to handle rapidly growing Internet traffic.

The fact is, pricing freedom is a key to the success of the Internet. And, existing government oversight, including antitrust authority, is sufficient to rein in any potential anticompetitive behavior in those unlikely circumstances where market forces fail.

Lost in the incredibly contentious net neutrality debate in Congress and the media is the role that competition and antitrust law should play in assuring that consumers continue to have access to their preferred Web sites. Although net neutrality proponents have loudly complained about the danger that an Internet service provider would block access to websites they compete with or whose views they don’t like, there are to date no real life examples that this has occurred (except where governments, like the one in China, block certain traffic). The reason is competition.

Network providers know that if they block access to a favored web site, their customers’ swift and sure response will be to take their business elsewhere. And, in the unlikely event that a provider risks alienating its customers, the Department of Justice, the Federal Communications Commission and the Federal Trade Commission have ample legal authority under existing laws to stop the offending practice.

That is why Congress created these agencies, and already has instructed them to ensure that communications (and other) firms play fair. The FCC has already used that authority to slap down one local North Carolina Internet Service Provider, Madison River, for blocking Internet-based phone service offered by Vonage. And there remains the ability of private parties to enforce the antitrust laws—encouraged by the prospect of treble damages. Indeed, Google has recently warned that it may bring antitrust actions against internet service providers that abuse their market power. What better evidence can there be that current law is sufficient?

Why not add even more legislative language to require regulators to issue even more rules to ensure that all Internet providers treat all websites equally? Because of another “law”—the law of unintended consequences. Net neutrality regulations could very well interfere with the carriers’ abilities to enhance the capacity of their broadband networks by limiting their ability to get an adequate return on investment. This, in turn, could chill innovations ranging from telemedicine to those we could only predict with hindsight, such as eBay or Google.

Rather than heavy-handed government mandates that presume to know the best way for the Internet to evolve, we should continue to keep the “hands-off” policy that has enabled the Internet to become the powerful engine of innovation we enjoy today. The genius of competition, backed by long-standing and proven laws that block the abuse of corporate power, has worked in the past. It should be allowed to work in the future.