Do Net Neutrality Rules Achieve the Unstated Objectives?

Where public policy is concerned, stated formal outcomes are accompanied by unstated expected unstated outcomes. In other words, there are private interests at work whenever public policies are proposed.

Rarely are any major public policies honestly assessed, in terms of whether the formal stated objectives--and the expected causal chain believed to achieve the objectives--actually happened.

Most observers looking at policy debates in the Internet ecosystem would likely agree that Internet app interests have won virtually all the “important” debates when the contest is between app providers and access providers.

At least a few would honestly admit that among the actual objectives of many policy rules, whatever the state valid public purpose, is the fostering of domestic app industries, and limitations placed on perceived leaders based in other nations.

In a new analysis, Strand Consult takes a look at network neutrality rules and the possible impact on consumer welfare and app provider financial performance.

Strand’s conclusions are troubling or enlightening, depending on one’s point of view. Contrary to intentions, “countries that use hard rules (legislation and regulation) have a lower rate of ‘edge provider’ innovation created in the given country,” Strand says.

Supporters of strong versions of net neutrality rules have argued that the rules will support app provider innovation. The issue Strand tackles is whether that winds up being true.

To be sure, most people and most governments support some basic net neutrality protections, such as end user access to “all lawful apps.” Most believe lawful apps should not be blocked, although there often is disagreement on the part of some governments about what is lawful.

The issue is strong forms that seemingly forbid treating any application, or any bits, “differently.” Extending the concept beyond rules about end user “access” to apps (without blocking or intentional degradation for commercial or political reasons), some now believe net neutrality extends to business models or commercial practices.

That is why there is opposition in some quarters to zero rating, or any promotional policies offering temporary sales, coupons, incentives or other inducements commonly used when marketing products and services.

In countries with strong versions of net neutrality rules, the rate of native innovation declines once rules are put in place, but American internet companies such as Google and Netflix take a greater share of so-called edge innovation, crowding out locally made innovation, Strand argues.

In contrast, countries with soft rules (or even no rules in some cases) have a higher rate of locally-developed content and applications, Strand argues.

It is an important point for countries that wish to support their native industries that hard net neutrality rules may be ill-advised, says Strand.

As a caveat, it is not possible to be entirely certain about whether there is a causal effect, or simply correlation. But Strand argues there is causation, and that the impact actually might be the opposite of what supporters intended.

The report includes a detailed study of zero rating, and finds that the recent war against zero rating, a practice that is used by half of world’s mobile operators for almost a decade, is a campaign waged by opponents to reduce or remove usage caps as a commercial policy.

To be sure, people have the right to differing opinions about such matters.

Some of us argue zero rating is a proven and effective tool for introducing non-users to the values of the Internet, much as similar promotions are used to acquaint consumers with new products they have not used before.

Strand argues that bans on zero rating have no record of consumer complaint about the practice. Some policy advocates may not like the practice, but there is no evidence consumers dislike it.

In Slovenia, for example, the ban on zero rating cut traffic to local content and applications in half, Strand notes.

Debate will continue for some time. The consequences will take longer to assess. Strand is among the first to try and examine rule effectiveness. Unfortunately, other forces are at work.
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