Matthew Yglesias is a liberal blogger and staff writer for The American Prospect. He is currently more interested in the NBA playoffs than in politics, but he has taken a break from the action to write a useful piece on network neutrality.
Network neutrality is one of those annoying Washington terms that could just as easily mean the opposite of what its does mean. One might think it indicates that government regulators are “neutral” toward the owners of physical infrastructure in network industries like cable or broad band or telephone. Actually, it means that regulators are heavily involved in restricting the prices at which such owners can sell their services to content providers.
Matthew’s piece raises the right issue. Unrestricted pricing means prices will be above the marginal costs of service in the short run, and this is inefficient. But unrestricted pricing also means profits and increased innovation, implying lower prices and better quality in the long run.
I am far more convinced than Matthew that the dynamic benefits outweigh the short-run cost; the history of these and related industries suggests that innovation wins out if regulators do not interfere. But Matthew is right that this is an empirical question, and we do not yet have compelling evidence in either direction.
Comments