ThoughtPiece: Wireless Net Neutrality

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“Net neutrality” is a term that’s gotten a lot of press recently as it involves a fundamental debate regarding the access and use of the Internet. The citizen advocacy coalition Save the Internet defines the concept as the principle that in using the Internet “all users can access the content or run the applications and devices of their choice.”

Tim Wu is a law professor at Columbia University and is the one who first popularized the term “net neutrality.” Not surprisingly, he has also written an important paper on the wireless industry in the US in which he applies some of the same analysis.

Professor Wu observes that the US wireless industry is a textbook oligopoly: a market dominated a small number of sellers who wield considerable power. The result is a wireless world where we do not have the equivalent of net neutrality: carriers exercise stringent control over devices and applications.

Wu offers an interesting analogy with the situation that existed in wire line telephony, where “for much of the 20th century until the 1970s, the AT&T monopoly barred consumers from attaching anything but a Bell telephone to their network….That rule, unsurprisingly, suppressed all competition and most innovation in the making of telephones.”

AT&T argued “that control over all equipment on the network was necessary for the telephone system to function properly.” One AT&T ad stated: “It takes a totally unified system to make it all work. One system. AT&T.” If that sounds familiar, it should: it is exactly the same argument made by wireless carriers today.

The situation changed in a landmark 1968 case referred to as the Carterfone case. AT&T wanted to prohibit the use of the “Carterfone,” a device that facilitated communication between a mobile radio and a telephone.

The FCC in Carterfone struck down AT&T’s rule as “unduly discriminatory” and rejected arguments made by AT&T that suggested control over all equipment on the network was necessary for the telephone system to function properly.