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  1. #1
    WHT-BR Top Member
    Data de Ingresso
    Dec 2010
    Posts
    18,573

    [EN] A New Path Forward For Net Neutrality

    Hal Singer
    Jan 10, 2017

    The changing of administrations offers a fresh chance for Washington to rethink net neutrality. While it’s easy to find faults with the prior regime, it is hard to articulate an alternative that would satisfy more than a narrow constituency.

    Let’s begin with the easy part. The Obama Administration’s Title II approach was faulty in at least two key dimensions. It proscribed business models that could benefit real-time apps and generate a new source of revenues for Internet service providers (ISPs). And it ignored a set of firms that represent an equal if not greater threat to innovation by Internet startups.

    The replacement to Title II must balance the dual objectives of stimulating investment at the core and the edges of the Internet. With ironclad protections that ban new business models, investment at the core can be discouraged. Indeed, the imposition of Title II in early 2015 has been associated with ISP investment declines in recent studies by PPI and by USTelecom. Too little protection, including a naive reliance on antitrust enforcement, could threaten investment at the edge.

    With this delicate balance in mind, an ideal regulatory regime for the Internet would embody three principles:

    • It would reject ex ante prohibitions of new business arrangements on the Internet, and instead embrace case-by-case review of allegations of discriminatory or exclusionary conduct;
    • It would reject asymmetric regulation of core and edge providers, and instead establish a forum for adjudicating complaints against any dominant platform provider, including Internet intermediaries and mobile operating systems; and
    • It would fill gaps in antitrust laws that leave upstart edge providers vulnerable.


    More Frightening Than ISPs

    I’ve spilled a lot of ink on this blog on the first principle, so I’ll skip right to the second: Title II-based net neutrality prevented ISPs from imposing charges on edge providers, through paid-prioritization or zero-rating arrangements. That narrow lens ignored the threat to innovation from other Internet gatekeepers: Dominant edge providers such as Google and Facebook can leverage their power in search and social media, respectively, into content “verticals,” making life difficult for Internet upstarts. And dominant operating-system providers such as Google and Apple can pre-install their own apps and services onto Android and iPhones, respectively.

    Remember Tim Wu, the Columbia law professor who coined the phrase net neutrality? Working with economist Michael Luca and three data scientists from Yelp, Wu recently published a Harvard Business School working paper showing that Google deviates from its organic search results to favor its own local properties in a search for cafes in Louisville. This is discrimination against edge providers, plain and simple. A similar theory has been advanced by the European Union, which accuses Google of diverting traffic from competitive rivals to favor its own comparison-shopping site.

    Google’s defenders argue that Wu’s experiment can’t speak to other types of Internet searches (outside of Louisville cafes), and that even if the results were representative of Google’s conduct in general, further regulation is unnecessary because antitrust law provides adequate protection for independent content providers. Similar arguments were advanced to counter net neutrality regulations.

    Wu and his co-authors find that, when Google was tricked into reverting back to its organic search results, which elevated the rankings of competing independent properties, users were 40 percent more likely to engage with the search results, as measured by click activity. To the extent that fewer clicks mean fewer matches between buyers and sellers on the Internet (and fewer consummated transactions), Google’s favoritism of its own local properties implies an output reduction. And conduct by a firm with market power that restricts output (or leads to higher prices) without any efficiency justification is generally condemned by antitrust.

    Is Antitrust A Reliable Backstop?

    Unfortunately, antitrust laws are not up to the task of policing discrimination on the Internet. As a practical matter, no private litigant would likely risk the resources to bring a discrimination case into an antitrust court unless it could empirically link (and not just imply) the restraint to a short-term price or output effect. Because such proof will generally be impracticable, antitrust may be the wrong framework to address discrimination by a vertically integrated platform provider.

    To borrow an analogy from labor laws, we do not turn a blind eye toward discrimination in the workplace so long as there is no associated wage effect; rather, discrimination is pernicious because it denies an equally qualified applicant the opportunity to compete on a level playing field.

    Setting aside whether such discrimination is even “cognizable” under existing antitrust laws, a private antitrust case against Google could face several years in court given the inevitable appeals, with considerable outlays on lawyers and experts. Given the importance of big data, first-mover advantages that cement network effects for Internet incumbents are difficult to overcome. By the time the antitrust litigation is resolved, Google will have extended and cemented its power in the vertical arena, leaving little chance for the plaintiff to get a foothold. This is how innovation dies.

    (continua)

  2. #2
    WHT-BR Top Member
    Data de Ingresso
    Dec 2010
    Posts
    18,573
    A New Forum Is Needed

    This isn’t the first time that Congress confronted the problem of a discrimination by a dominant platform provider and the limits of antitrust. By the early 1990s, cable operators had vertically integrated into programming, and demonstrated a willingness to favor their own content over competitive programming rivals. For example, in the early 1990s, Comcast and TCI were less likely to carry Home Shopping Network compared to their affiliated (and similarly situated) QVC.

    Rather than ban vertical integration, Congress permitted it. But as a compromise, Congress empowered the Federal Communications Commission (FCC) to police discriminatory conduct that harmed innovation among independent programmers. These protections were codified in section 616 of the Cable Act in 1992.

    Importantly, Congress recognized that antitrust was too clunky of an instrument, and established an evidentiary burden (harm to the independent programmer) that was weaker than the burden in antitrust (harm to competition). Congress meant to fill a gap in antitrust protection. At the time the Cable Act was amended, the largest cable operator in the country, TCI, served fewer than 20 percent of national cable subscribers; an antitrust complaint by a national cable network against TCI was sure to fail the market-power requirement.

    In the past decade, several complaints have been brought against vertically integrated cable operators pursuant to section 616. Some of the notable cases include NFL Network v. Comcast, MASN v. Comcast, Tennis Channel v. Comcast, and GSN v. Cablevision. In each case, the FCC’s Administrative Law Judge (ALJ) held an evidentiary hearing, and in many cases, the complainant achieved a modicum of relief. (Disclosure: I was the independent network's economic expert in each of these matters. I even got Tim Wu to attend the hearing during my cross examination in Tennis Channel v. Comcast.)

    While this case-by-case procedure is by no means perfect—cable operators can appeal the ALJ’s decision to the full FCC and then to the D.C. Circuit—it does provide a template for how disputes between competing factions of the Internet ecosystem can be adjudicated. This new forum could resolve claims that an ISP gave preferable terms of a paid-prioritization arrangement to an affiliated content provider as readily as it could resolve claims that a search provider gave preferable ranking to an affiliated web property.

    While Congress could empower any agency to police the Internet from discrimination, the FCC is a natural forum given the agency’s experience in adjudicating program carriage complaints against vertically integrated cable operators. In a perfect world, the finding of the ALJ (or arbitrator) would be final and binding, thereby limiting the duration of case-by-case adjudication to months instead of years. Another benefit of limiting appeals is that it would eliminate the FCC commissioners (and any whiff of politicization) from the process.

    It’s easy to pitch a regulatory solution to net neutrality that appeals to just progressives (as Obama did) or just to free marketeers (as some Trump supporters are wont to do). It’s much harder to design a lasting compromise that garners appeal from both sides. Fortunately, the regulatory template already exists.

    I am a senior fellow at the George Washington University Institute of Public Policy.

    http://www.forbes.com/sites/washingt...net-neutrality

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