Alt-Coin Trader

Cost-benefit analysis: net neutrality makes economic sense

Most arguments in favor of net neutrality regulation focus on fairness to the public. Definitions of "net neutrality" often characterize it as a principle that fosters free speech on the Internet. But a new study contends that barring ISPs from favoring certain content providers is more than a good concept—it's also sound economic policy.

"Without net neutrality rules, new technologies could lead to pricing practices that transfer wealth from content providers to ISPs," warns the Institute for Policy Integrity, "a form of price discrimination that would reduce the return on investment for Internet content—meaning website owners, bloggers, newspapers, and businesses would have less incentive to expand their sites and applications." 

Such a reallocation of resources would hobble investment in the 'Net overall, concludes Free to Invest: The Economic Benefits of Preserving Net Neutrality (cheat sheet version here).

IPI is a New York University-based think tank that looks closely at environmental issues. But as the group's executive director Michael Livermore told us, the outfit also focuses on what it sees as a missing element in much pro-environmental regulation policy, the use of cost-benefit analysis. Generally, this kind of thinking is used to oppose government intervention on the grounds that some specific regulation actually has more costs than it produces in benefits. 

But it doesn't have to be that way. "Americans are willing to support regulation that solves significant failures of the marketplace, and cost-benefit analysis can show where new or strengthened regulations are justified on economic terms," Livermore writes.

So when Consumers Union encouraged IPI to take a look at broadband-related issues, the institute adjusted its work from climate change to the 'Net. Here's what it saw.

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