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94 Geo. L.J. 1847 (2005-2006)
Network Neutrality and the Economics of Congestion

handle is hein.journals/glj94 and id is 1859 raw text is: Network Neutrality and the Economics of
The Supreme Court's Brand X decision has reignited the debate over network
neutrality, which would limit broadband networks' authority to impose restrictions
on end users' ability to access content, run applications, and attach devices and to
charge content and application providers higher prices for higher levels of quality of
service. In this Article, Professor Christopher Yoo draws on the economics of
congestion to propose a new analytical framework for assessing such restrictions.
He concludes that when transaction costs render metering network-usage uneconomi-
cal, imposing restrictions on bandwidth-intensive activities may well enhance eco-
nomic welfare by preventing high-volume users from imposing uncompensated costs
on low-volume users. Usage of bandwidth-intensive services can thus serve as a
useful proxy for congestion externalities just as port usage served as a proxy for
consumption of lighthouse services in Coase's classic critique of the economic
parable of the lighthouse. In addition, content delivery networks and other commer-
cial caching systems represent still another innovative way to manage the problems
associated with congestion and latency that would be foreclosed by network neutral-
ity. Furthermore, allowing network owners to differentiate their services can serve
as a form of price discrimination that can mitigate the sources of market failure that
require regulatory intervention in the first place. This framework suggests that
broadband policy would be better served by embracing a network diversity principle
that would eschew a one-size-fits-all approach and would allow network providers
to experiment with different institutional forms until it can be shown that a particu-
lar practice is harming competition. At most, concerns that telephone companies
may prevent end users from using their digital subscriber line (DSL) connections to
access Voice over Internet Protocol (VoIP) provide support for targeted regulatory
intervention. They do not justify a blanket prohibition of end user restrictions that
network neutrality proponents envision.
INTRODUCTION     ..........................................                    1849
II.  SOURCES OF CONGESTION ON THE INTERNET. ..................               1860
* Visiting Professor of Law, University of Pennsylvania Law School; Professor of Law, Vanderbilt
University. © 2006, Christopher S. Yoo. This Article benefited from workshops conducted at the 33rd
Telecommunications Policy Research Conference; the Wharton Colloquium on Media and Communica-
tions Law; the Entertainment, Media, and Cultural Policy Colloquium at the UCLA School of Law; and
an ad hoc workshop at the University of Pennsylvania Law School, as well as from comments from
Gerry Faulhaber, Bob Rasmussen, and Mike Vandenbergh. After the research underlying this Article
was substantially complete, I was retained by the National Cable and Telecommunications Association
(NCTA) to consult on matters related to issues discussed in this Article. The views expressed herein are
my own and should not be attributed to NCTA.


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