[Special Section on Net Neutrality] Scenarios for the Network Neutrality Arms Race

Abstract

Several factors suggest that meaningful network neutrality rules will not be enshrined in near-term U.S. telecommunications policy. These include disagreements over the need for such rules as well as their definition, efficacy and enforceability. However, as van Schewick (2005) has demonstrated in the context of the Internet, network providers may have economic incentives to discriminate in welfare-reducing ways; in addition, network operators may continue to possess market power, particularly with respect to a terminating monopoly. On the other hand, the literature on two-sided markets, the challenge of cost-recovery in the presence of significant fixed and sunk costs, and the changing nature of Internet traffic all provide efficiency-enhancing rationales for discriminatory pricing and traffic management. Thus, policy-makers face a daunting challenge: discriminatory behavior is likely to occur and distinguishing between good and bad discriminatory behavior is difficult. Assuming that various forms of network-based discrimination are likely to occur, broadband end-users may employ a variety of technical and non-technical strategies to counteract its effects, which in turn, will likely elicit further responses from the network operators. The goal of this paper is to characterize the resulting arms race by examining scenarios for how downstream end-users of broadband, sometimes in conjunction with upstream players (e.g. content providers), might respond to limit the potential harm from network-based discrimination. We identify three classes of end-user responses: (1) infrastructure-based bypass (e.g., municipal open access networks, mesh networking, or multi-homing); (2)