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Study: U.S. Would Pay Huge Price for Net Neutrality

As the FCC moves to take more control over broadband, a new report claims the economy would take a big hit from net neutrality.
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Internet neutrality rules would be "destabilizing" and cost the United States a projected 502,000 jobs – not to mention $62 billion annually in terms of lost gross domestic product, according to a new study.

The report is from New York Law School, but a lot of its analysis is based on figures from a Brattle Group report sponsored by Mobile Future, a coalition of companies that includes AT&T. AT&T is, of course, a company that prefers the status quo—and has even tried to enlist its employees to oppose efforts by the Federal Communications Commission to regulate the Internet.

The study's results come at a moment when the FCC has moved to take more control over broadband. Commissioners voted 3-2 on Thursday to put out for public comment proposed new rules, dubbed the "Third Way," that would subject Internet service providers to some of the same non-discrimination rules that apply to phone companies. (Data transmission would be regulated, but not content or apps.)

The new framework has come out of a legal battle with Comcast. (The public will have three months to comment on three different plans: Besides the "Third Way," the other two options are to leave the existing regulatory framework in place or impose stricter regulations than those of the "Third Way".)

Almost immediately AT&T released a statement calling the FCC's plans "impossible to justify on either a policy or a legal basis."

Said Jim Cicconi, AT&T's senior executive vice president for external and legislative affairs: "We remain confident that if the FCC persists in its course—and we truly hope it does not—the courts will surely overturn their action." AT&T chief executive Randall Stephenson also threatened in the Wall Street Journal to slow down investment in the company's U-Verse IP-video network, its answer to the cable industry's TV, Internet, and phone packages – and one that would offer small business free, unlimited access to AT&T's WiFi network. (What the Journal article doesn't note: AT&T already has started turning the taps off on U-Verse.)

Senator Jay Rockefeller, the West Virginia Democrat who chairs the Senate Commerce Committee, which oversees the FCC, said he supported the commission, but added: "In the short term, this is the right course and the right thing to do. In the long term, I believe we need to develop consensus to update the law, further safeguard consumers, and spur universal broadband deployment."

As for the New York Law School research, it claims that FCC regulation "could have devastating impacts across the ecosystem between 2010 and 2015," and that history "suggests that the [FCC] is incapable of micromanaging a dynamic sector via regulatory fiat and that such action results in consumer welfare and economic losses." (Keep in mind that the report – titled "Net Neutrality, Investment & Jobs" – also has heated subheads such as "Apocalypse Now?") The study authors are Charles Davidson, the director of New York Law School's Advanced Communications Law & Policy Institute, and Bret Swanson, head of the Entropy Economics research firm.

The Brattle Group study, released in April and cited in the more recent research, said net neutrality regulation "could slow the growth of the broadband sector, potentially affecting as many as 1.5 million jobs." Broadband industry job losses could reach 14,217 in 2011 and 342,065 in 2020, the report asserts.

"The possibility that such losses would be offset by gains in other parts of the Internet economy is remote," says the report.

Last updated: Jun 18, 2010

Inc. contributing editor COURTNEY RUBIN was for five years a London-based staff writer for People magazine. Rubin, a former senior writer for Washingtonian magazine, has written for the New York Times magazine, Time, Marie Claire, and other publications. She is the author of The Weight-Loss Diaries.




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