Gov Regulators Issue Wait-And-See Net Neutrality Report

The Federal Trade Commission issued a staff report Wednesday on Net Neutrality, coming firmly down in the wait-and-see-if-ISPs-begin-acting-badly camp, cautioning lawmakers to be careful about creating rules that interfere with competition.

The FTC's Internet Access Task Force's report, which the five-member commission approved unanimously, describes the debate, the internet's architecture and the issues around competition in broadband.

Based on what we have learned through our examination of broadband connectivity issues and our experience with antitrust and consumer protection issues more generally, we recommend that policy makers proceed with caution in evaluating proposals to enact regulation in the area of broadband Internet access. The primary reason for caution is simply that we do not know what the net effects of potential conduct by broadband providers will be on all consumers, including, among other things, the prices that consumers may pay for Internet access, the quality of Internet access and other services that will be offered, and the choices of content and applications that may be available to consumers in the marketplace.

Proponents of Net Neutrality want federal regulators or lawmakers to prohibit Internet Service Providers, which are increasingly offering their own content and services such as internet telephony from degrading their competitor's traffic -- whether that be Vonage or YouTube. They also fear that ISPs will divy up their pipes into fast lanes and slow lanes and charge content providers to get into the fast lane. Opponents of Net Neutrality, which include free marketers and ISPs, argue that people will benefit from dedicated lines for important traffic and regulations will stymie investment into fatter internet pipes.

The FTC's conclusion is that they just don't know:

Even assuming discrimination against content or applications providers took place, moreover, there remains the question – also unanswerable in the abstract – whether such discrimination would be harmful, on balance, to consumer welfare. For example, such discrimination may facilitate product differentiation, such as the provision of Internet access services designed specifically for certain population segments or other audiences with specialized preferences.

Such prioritization may provide benefits to broadband providers, content and applications providers, and end users. Prioritization may allocate resources to their highest-valued uses by, for example, allowing content and applications providers that value higher-quality transmission services, such as VoIP or online gaming providers, to pay broadband providers for such services.

Prioritization may enable broadband providers to obtain income streams from content and applications providers and other users of broadband networks besides the broadband providers’ own customers, resulting in increased investment and innovation in such networks. Prioritization may aid innovation in applications or content, such as streaming video and other real-time applications, that require higher-quality transmission to operate effectively. Prioritization may provide a dimension for both content and applications providers and broadband providers to differentiate their offerings, to the benefit of competition and consumers. Prioritization also may lower prices for less affluent end users, whose access fees could be partially subsidized by prioritization revenues, much like advertising-supported e-mail services now provide free e-mail accounts.

But on the other hand the commission says :

Prioritization could enable exclusive deals for priority that, if combined with inadequate delivery of non-priority data, would hinder the traditional ability of every end user to reach every content and applications provider through a single Internet access agreement. As with data discrimination, we are unable to determine in the abstract the net effect on consumer welfare of the various forms of data prioritization that may be pursued in the marketplace.

But it's clear from the 170 page report (.pdf) that the FTC has no immediate plans to step in on its own, which likely makes one side of this debate happy.