Policy

Neutrality Rules Would Clog the Pipe

7/14/2006 8:00 PM Eastern

The following is an edited excerpt from comments Verizon Communications Inc. executive vice president, public policy, affairs and communications Tom Tauke made to The Media Institute in Washington, D.C., on July 11.

Net neutrality is perhaps the oddest Washington debate I have seen. It amounts to holding a Congressional vote on hypothetical business plans.

On one side, we have policymakers giving consumers the final say in the kinds of Internet services they use, while innovators are free to do what they do best: create and offer new products and services to their customers. On the other side, we have policy makers suggesting that new and different business models driven by innovation actually may harm consumers and the Internet. They want government to take pre-emptive action because bad things could happen.

Frankly, this fear of the market simply doesn’t compute. The government’s hands-off approach to the Internet has been enormously successful. … The broadband share of homes connected to the Internet has grown from about 25% in 2002 to more than 60% in 2006.

What could be the motivations to get government in the middle of a market that is working so well? I can see why some of the big companies that have done exceedingly well on the Internet of today want to lock in the current business model. They’d like to perpetuate what is working for them.

But for consumers and the country, government regulation of this developing market is a lose-lose proposition.

First, we’ve seen what happens to innovation when the government imposes old world, common-carrier regulations and tries to anticipate or impose business models. Remember? It was called video dialtone. It didn’t work then, and efforts to apply so-called “non-discrimination” standards to access IP networks today will have the same result.

Second, old-world regulation would severely hamper the deployment of the new networks that are the essential foundation for the broadband world.

Today there are about 800 million Internet users globally, a number that will double in 10 years. Average online surfers today use about 2 Gigabits of data per month; in 10 years, that figure will be 220 Gigabits. Downloading one high-def movie devours more bandwidth than downloading 35,000 Web pages or 2,300 songs. … Today’s access and backbone networks don’t have the capacity to handle that kind of traffic.

Finally, without the ability to sign commercial agreements, network operators could not meet innovators’ needs.

For example, online video-gaming is a growing business, and consumers of those sites expect a seamless experience for their role-playing and action games. Let’s say a gaming company has a game that requires 25 Megabits of capacity. Consumers may be paying for Internet access speeds anywhere from, say, 5 Megabits to 15 Megabits. That company could enter into a commercial agreement with Verizon to provide online gamers the Megabit burst they require for a quality experience.

If policymakers decide that network access cannot be created differently, we drag broadband back to the days where there was no incentive to innovate and very little competition.

In a world of 30 or 50 or 100 Megabit networks — more than enough capacity to meet the needs of everyone — there are no network problems. In the midst of this healthy, emerging marketplace, imposing regulations isn’t a policy approach government should be taking.