Econmists Argue For Third Way

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A quartet of economists has written FCC chairman Julius Genachowski with a shout-out for his "third way" Title II reclassification of broadband.

They believe Genachowski's approach would help preserve what is currently a de facto network neutrality regime in which most service providers "do not currently engage in prioritization or price discrimination tactics that would be restricted under the proposed rules."

The cable industry has argued that de facto neutrality makes reclassification unnecessary, but the economists suggest it is instead an argument for the chairman's proposal, which is to apply a handful of Title II common carrier regs to broadband service provision to anchor the commission's regulatory authority to oversee network management, access and other things.

In the letter, a copy of which was obtained by Multichannel News, they take aim at the 74 House members who wrote the chairman May 24 to express their concerns about his "third way" and its impact on the economy and investment.

"The analysis in that letter is based on a misunderstanding of the current state of the Internet and does not accurately reflect the economic impacts of network neutrality," they wrote. "As economists who have researched the impact of network neutrality regulations on the Internet, the economy, and society as a whole, we ask that you consider moving forward with network neutrality regulations."

The four are Subhajyoti Bandyopadhyay and Dr. Hsing K. Cheng, both associate professors, Warrington College of Business Administration, at the University of Florida; J. Scott Holladay, Economics Fellow, Institute for Policy Integrity, New York University School of Law; and Joacim TÃ¥g, Research Fellow at the Research Institute of Industrial Economics.

Their letter assumes that not reclassifying means the end of that de facto network neutrality, while cable operators say it would not. "Without network neutrality regulations," they write, "Internet Service Providers would be allowed to engage in pricing practices that transfer wealth from content providers to Internet Service Providers. Shifting wealth away from an already under-compensated group may worsen this market failure, disincentivize content provision, and make providing an economically efficient level of information on the Internet even more difficult."

The FCC is currently soliciting outside comment on the chairman's proposal, with action one way or the other expected by early fall.

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