Many readers have been asking me to clarify my stance on net neutrality. Here are a few qiuck but key points:
1. I favor net neutrality in the current environment. Without neutrality, Comcast and Verizon would use differential pricing schemes to extract more revenue and thus diminish some forms of Net output, including Google, Amazon, ebay, and possibly blogs.
2. If the cable and telecom companies had no legally-backed monopoly powers, I would not favor legally enforced net neutrality. "Let the market decide" would be a good answer.
3. Those powers are eroding with time but still the market for high-speed connections is far from contestable. Municipal wireless would matter a great deal but that is not a pure market solution either.
4. Ex ante, it is hard to predict what will "stick" on the Net. I see positive and uninternalized social value in the level of experimentation which we currently enjoy. Profit-maximizing pricing from Verizon and Comcast would choke this off to some degree.
5. Bandwidth might become so scarce that differential pricing is needed to give companies the incentive to create more of it. Then net neutrality could be a bad idea, even in spite of #1-4. But we are not there now and maybe we will never be. Municipal wireless, or some related idea, probably will arrive first. In the meantime stop watching those silly videos.
6. A related question is this: we all know that road pricing can make economic sense. But should we favor differential and profit-maximizing pricing on non-contestable roads? At low levels of congestion, probably not. It is better to let people get to work.