On June 8, the House of Representatives squashed an amendment that would prevent telecommunications companies from charging Internet content companies more to deliver enhanced services, such as high quality audio and video content. Experts at Wharton say the failure of the amendment could be considered a positive development since legislation may have led to a number of unintended consequences.
The amendment would have required "network neutrality," an often-debated term that is not easy to define. To network neutrality's supporters, like Google, Yahoo and eBay, the term means that telecommunications companies should be required to treat all Internet traffic -- whether bandwidth-hogging video or a brief email message -- the same. To companies like Verizon and AT&T, imposing network neutrality would mean that they could not charge for enhanced services on networks that cost them billions of dollars to build. Ultimately, the telecommunications companies argue, network neutrality would take away incentives to construct next-generation broadband networks.
Network neutrality became a hot issue last fall when top executives at AT&T and BellSouth noted that companies like Google, Yahoo and Vonage were essentially distributing their services for free on the backs of telecommunications companies. "For a Google or a Yahoo or a Vonage, or anybody, to expect to use these pipes for free is nuts," said Ed Whitacre, chairman of AT&T, in November.
That comment set off a heated argument on the issue that became "even more crazy than most debates in Congress," says Gerald Faulhaber, a Wharton professor of business and public policy. Indeed, on the eve of the June 8 vote, Internet giants were lobbying intensely for the amendment, with Google CEO Eric Schmidt urging users in an undated open letter to "take action to protect Internet freedom."
Faulhaber convened a meeting of scholars -- including David Farber, a computer science professor at Carnegie Mellon, Christopher Yoo, a Vanderbilt law professor, and Michael Katz, an economics professor at the University of California Berkeley's Haas School of Business -- to consider the issue.
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