"Net neutrality" would get in the way of network development



    MONTREAL, June 4 /CNW Telbec/ - Consumers should be free to choose the
Internet price and service combinations that best suit their needs rather than
have the government legislate in the development of an industry as volatile as
the Internet.
    Using regulatory power to apply the "net neutrality" principle would be
misguided because this concept masks new constraints on the owners of
telecommunications networks regarding uses and fees for their services, says
an Economic Note published today by the Montreal Economic Institute (MEI).
    "The development of Canadian competitiveness in telecommunications should
not be damaged in the name of hypothetical fears of short-term prejudice,"
said the Note's author, Marcel Boyer, MEI vice president and chief economist.
"In the longer term, eroding the property rights of access providers will
weaken their incentives to invest in developing capacity and in upgrading
their networks. This will lead to lower performance and higher-cost services."
    Although the CRTC has already ruled that Bell Canada's Internet traffic
management practices are legal, the government regulatory body has decided to
broaden the debate, notably in public hearings due to start next month. Bill
C-398, submitted by the NDP, raises similar issues and will also be examined
in Ottawa.
    Bearing in mind the growing popularity of new applications such as video
streaming and IP telephony, net neutrality risks blocking innovation in
broadband Internet services by eliminating incentives to invest continuously
in faster data flow and in network quality and security. Price and service
regulation of this sort would lead to lower efficiency in the highly dynamic
market for next-generation Internet services.
    MEI president Michel Kelly-Gagnon noted that, "historically, the Internet
has been fully deregulated, and its freedom and independence must be defended
since government intervention would spell the end of this network as we know
it. An Internet based on the free market is superior because network owners
have a mutual interest in solving problems, innovating and responding to
consumers' needs while receiving a competitive return on their investment."

    This Economic Note, titled Is Net Neutrality Economically Efficient?, is
available free of charge at www.iedm.org.

    Net neutrality is not economically efficient

    Invoking the protection of competition in a misguided manner will not
help advocates of net neutrality achieve their goals. The free market must be
allowed to play its role, with network owners and access providers being
allowed to differentiate their services and fees.
    As long as there is adequate competition and the information provided to
consumers is sufficient for them to make knowledgeable decisions between
various service offerings, regulation of fee formulas is not necessary or
desirable since it would get in the way of discovering the best offers.
    The government should protect the interests of all users and citizens,
and it should promote optimal network use, Mr. Boyer said, adding: "It is
preferable to have a general monitoring body such as the Competition Bureau
look into obstacles to competition when there is evidence of abuse or illegal
practices by access providers."

    The MEI

    The MEI is showing an interest in the issue of property rights in the
telecommunications sector. On May 28, it published an initial study, titled
Forced access to telecommunications networks, which pointed out that this
public policy deters private investment.
    The Montreal Economic Institute is an independent, non-partisan,
not-for-profit research and education organization. Through studies and
speeches, the MEI contributes to debate on public policy in Quebec and across
Canada, suggesting reforms for wealth creation based on market mechanisms.




For further information:

For further information: and interview requests: André Valiquette,
director of communications, Montreal Economic Institute, (514) 273-0969, ext..
2225, Cell: (514) 574-0969, avaliquette@iedm.org


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