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Thomas Hazlett
Thomas Hazlett

Author Thomas Hazlett, a prominent voice on the information economy, laid out his arguments for the fallacy of net neutrality in a March 28 lecture at the Terry College of Business.  

Proponents of net neutrality take the view that internet service providers should not be allowed to block, slow down or charge money for specific websites and content.

“The question is, will internet service providers like AT&T and Charter take their customer connections and say, ‘We’d like to divert our customers toward favoring this particular search engine or this particular movie service. We’re going to have a fast lane for our stuff and a slow lane for the other stuff’?” Hazlett asked. 

The answer, he said, is a resounding no, thanks to competition in the marketplace.

Hazlett is the Hugh H. Macaulay Endowed Professor of Economics at Clemson University, where he also directs the Information Economy Project. His talk, “Regulating Broadband: The Law and Economics of Network Neutrality,” was sponsored by the Terry’s James C. Bonbright Center for the Study of Regulation

Regulating ISPs has been shown to reduce innovation and competition, Hazlett said. He cited the difference between the development of cable internet and digital subscriber line (DSL) internet in the 1990s. Because DSL used phone lines, it was regulated under Federal Communications Commission rules that did not apply to cable lines. 

“Up until the first deregulation of DSL networks, cable modems were killing the competition. Broadband was created by the cable companies, the unregulated industry. DSL was lagging behind,” Hazlett said. “That’s important because the technology all came from the phone industry. Bell Labs had 1,000 PhDs in the 1990s. It was a phenomenal research institution. Everybody thought that we’d get faster data service through the phone companies. But the unregulated cable sector led the way and created the industry. 

“Then you get deregulation [in 2005] and what happens? DSL takes off. By the end of 2006, DSL is doing far better, seeing a 65 percent increase. There is a very positive effect when you deregulate,” he said. 

Without net neutrality, some fear ISPs will limit customers to a “walled garden” of content. Hazlett said encouraging deregulated competition is the antidote and pointed to the story of AOL, which launched in the ’90s and only allowed users to visit its homegrown sites. 

“AOL made the internet popular. Not cool, but popular. And they did it with a walled-garden approach,” Hazlett said. “But that went away because of competition. People wanted to get access to all the stuff out there, not just what was on AOL. And that’s what AOL had to do: open the gates and let people have access to the internet.”

Net neutrality regulations also would stifle the innovation that can occur through corporate relationships, Hazlett said. 

“Let competition reign, let this stuff be open. There is an antitrust safety net. If customers want to pay for a fast lane, like with T-Mobile’s Binge On, where you get unlimited streaming, which does not clog the network because it’s been optimized, that is non-neutral and pro-consumer. That should not be a violation, but it is under standard rules,” he said.