Netting "net neutrality": new internet regulation threatens U.S. productivity.

America's future economic success rests on the broad-band investments of today. Economists project universal broadband deployment could add 1.2 million jobs and $500 billion to the U.S. economy. North American telecommunications companies will invest an estimated $70 billion in 2007 alone to build access and infrastructure. Despite our efforts, the U.S. lags the world in broadband access, ranking behind 14 other nations in per capita broadband subscribers.

Given the benefits of broadband deployment, it would seem logical that U.S. policy would support universal access and development of the high-speed technology so crucial to economic growth and American competitiveness. According to the June 25 BusinessWeek cover story, "A dollar spent on telecom infrastructure produces an outsize impact on the U.S. economy as a whole ... stimulating economic growth and productivity, more so than money spent on roads, electricity or even education."

However, broadband investments are being threatened by so-called "net neutrality," which in reality is "net regulation." The phrase net neutrality was coined by large, Web-based companies in an attempt to impose government regulations on communications companies based on their claim that these network owners may one day selectively block or slow access to Web content. In a highly competitive market, network owners already have ample incentive to provide customers with full and free access to content.

The Internet has seen exponential growth. For instance, YouTube, just two years old, is consuming as much bandwidth on its own as the entire Internet did in the year 2000.

The Internet has grown in part because of its unusual position of being unregulated in the otherwise highly regulated telecom environment. The Internet market is working, and regulating it becomes a solution in search of a problem. If Internet discrimination does occur, the Federal Communications Commission, which has already barred the practices that net neutrality proponents most often cite, has the authority to handle it. Before we embrace any regulation of the Internet, there should be undisputed evidence of a market failure and proof that such regulatory benefits will outweigh the costs.

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Though attempts are being made to position net neutrality as pro-consumer, in reality it is very anti-consumer. With net neutrality, Web-based companies would avoid compensating network owners for use of their facilities, leaving consumers and net-work owners to pay those costs. This would force the majority of consumers to pay for the high costs driven by a minority of Internet users, which would in turn undercut investment in networks and discourage the deployment of broadband facilities. A Rensselaer Polytechnic Institute study found that this net regulation-induced inefficiency would require a network's peak capacity to be doubled to carry the same amount of Internet traffic.