Capital Ideas Blog

Economists don't understand your internet bill, either

By Chelsea Vail

From: Blog

The IGM Economic Experts Panel comprises Nobel Laureates, John Bates Clark Medalists, and past members of the President’s Council of Economic Advisers. But there’s an economic issue so complex that many of the world’s top economists don’t know what to make of it. 

It’s your internet bill. 

A recent IGM poll asked these award-winning academics about the implications of abandoning network neutrality.
Should internet service providers (ISPs) be allowed to charge content companies for access to the ISP’s customers? Would that provide net benefits to consumers?

A whopping 58 percent of the economists participating in the poll were either uncertain, or had no opinion. Of those votes, 29 percent felt the evidence to support a claim of net benefits was ambiguous, and another 29 percent felt unqualified to answer.

More panelists have previously responded with confidence to polls on more urgent topics—such as whether the US economy would take a serious hit as a result of a debt default due to either financial distress or political brinksmanship. Only six percent replied that they were uncertain about that risk—75 percent agreed or strongly agreed, and only three percent had no opinion.

The issue of net neutrality, however, has many economists scratching their heads. The controversial and complex topic—whereby proponents say that ISPs and governments should treat all internet content equally—has become increasingly relevant since AT&T first proposed in 2005 that content providers could pay a fee to AT&T to deliver content to residential customers.

Net neutrality has vocal supporters in consumer groups, content giants, the Obama administration, and Apple co-founder Steve Wozniak, who in 2010 wrote an open letter in The Atlantic asking the FCC to keep the internet free. 

On the opposite end of the spectrum, telecom and cable companies want to charge YouTube, Netflix, and other content companies for the so-called last-mile service of delivering the content that consumes so much of their network capacity at peak times.

Recently in Washington, DC, net neutrality went on trial in the Circuit Court and the bargaining table in Congress. Verizon argued that the FCC had overstepped its bounds in regulating net neutrality, and House Republicans put it up against Obamacare as part of the debt ceiling negotiations. 

While net neutrality emerged unscathed from the latest Capitol Hill showdown, it remains to be seen how the DC Circuit will rule, and how the ruling will affect consumers.

Although more than half of economists punted on the poll, 20 percent did vote in disagreement with foregoing net neutrality. Berkeley’s Aaron Edlin, who specializes in antitrust economics and law, disagreed with a confidence of six on a 10 point scale, commenting that it “could easily lead to high transaction costs” and cause “confusion among consumers” about what they’re allowed to access.

Just nine percent agreed that allowing ISPs to charge content companies for access to consumers would provide net benefits to consumers (and 13 percent did not respond to the poll).

Chicago Booth’s Anil Kashyap commented with what was likely on more minds than his: “Curious to see what the IO [input/output] mavens say about this.” 


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