Net Neutrality is a Serious Compromise

Predictably, some policy advocates have said the Google-Verizon agreement on network neutrality does not go far enough, as it exempts wireless networks from the agreed-upon rules, namely the reservation of any quality-of-service features to Google, and barring Verizon from applying them.

In the past, though, many have argued that network neutrality rules that forbid any packet discrimination, even when users may want it, would impair network investment and prevent service providers from innovating in the access business.

The Google-Verizon agreement essentially creates this situation for Verizon, though exempting the wireless network, which has more technically-challenging network management issues. Some observers have opposed network neutrality rules precisely because they would remove incentives for continued investment in the network.

But that is what Verizon has agreed to. It cannot offer enhanced services beyond the plain-vanilla Internet access service to content providers at any price. Some will note that this is a form of price regulation, and that one should expect the normal response to price regulation, which is a shift of attention and investment elsewhere, where prices are not regulated, and where growth prospects are not constrained.

The point is that Verizon has made serious compromises, as has Google. That's generally what happens in such policy debates when industry contestants face a major change in regulation and they want to have some say in shaping the outcome.

The compromise agreement is not a disaster, or an unqualified win, for either Verizon or Google. Google might face some constraints in the wireless realm as Verizon faces constraints in the fixed network realm.

All initiative now rests with Google as far as creation of real-time Internet services whose value can be captured financially, on Verizon's fixed-broadband network. Verizon has had to trade away initiative on fixed networks to keep its options for wireless services.

The agreement also means Google is free to innovate in the realm of Internet services, while Verizon has to concentrate on managed services not part of the Internet. You might argue that allows each company to play to its historic strength. It also might be fair to say neither company was forced to play in realms where it has no natural advantages. That's a compromise, maybe even a grand compromise.

Why Business Should Oppose Net Neutrality - Robert E. Litan and Hal J. Singer - The Conversation - Harvard Business Review