Economists take sides on net neutrality
May 09, 2014
Just seven months ago, the esteemed members of the IGM Forum could not make up their minds about whether we should allow internet service providers to charge content companies for access to the ISP's customers.
Back in those halcyon autumn days, nearly 60% of the panel's experts had no opinion, or were uncertain, while only 9% agreed that the changes were a good idea.
Clearly, something is now different. This week the panelists were asked if the changes in distributional effect and efficiency mean that we should now let companies that send video or other content to consumers pay more to ISPs for using faster or higher-quality services. This time, 45% of the respondents agreed that this was a good idea.
For those of us who follow the IGM Forum, it is always interesting to see how the experts come to their conclusions—which means when they change their minds about something as important as net neutrality, we tend to sit up and listen. For example, MIT's David Autor wrote this note with his "agree" vote: "Net neutrality is a fiction. Hire cloud services to mirror your servers worldwide to speed up content to your users. One user to consider: Healthcare.gov!" Darrell Duffie of Stanford agreed, remarking, "If all qualities sell at the same price, markets cannot allocate quality efficiently. Works for soap, wine and haircuts; why not the internet?"
Of course, it is essential to point out that nearly 40% of the panel's participants still came up as uncertain, but only 4% chose not to vote—an average number for any poll. Of those who were uncertain, most are concerned that disassembling net neutrality will lead to higher costs for consumers. Abhijit Banerjee of MIT wrote, with his uncertain vote, "I worry it will crowd out the public goods that make the internet uniquely valuable unless bandwidth gets so cheap that it doesn't matter." Similarly, Princeton's Markus Brunnermeier commented with his no opinion vote, " This might lead to better allocation but also opens the room for price discrimination. The implications for the consumers are not obvious."
So, what has changed? An April report by cloud-services giant Akamai Technologies noted that the average peak internet speed worldwide was up 38% compared with the fourth quarter of 2012. Plus, according to the MIT Technology Review, mobile traffic increased during the third quarter of 2013, and grew by 80% over that year. So with more people using the internet and with faster speeds transferring more data, perhaps these experts now feel that the time has come to treat the internet more like any other industry.