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Econmists Argue for Third Way

A
quartet of economists has written FCC Chairman Julius Genachowski with a
shout-out for his "third way" Title II reclassification of broadband,
in part because they say it 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 B&C,
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.

Contributing editor John Eggerton has been an editor and/or writer on media regulation, legislation and policy for over four decades, including covering the FCC, FTC, Congress, the major media trade associations, and the federal courts. In addition to Multichannel News and Broadcasting + Cable, his work has appeared in Radio World, TV Technology, TV Fax, This Week in Consumer Electronics, Variety and the Encyclopedia Britannica.