Friday, January 25, 2008

Electricity Deregulation and Net Neutrality

I took in the Press Club panel about electricity deregulation or re-regulation or whatever they end up doing. Depending on how the weekend plays out, I may or may not post comprehensive summary of the program. But one quick line from the day deserves close attention.

The essential issue is whether it is possible to create a genuinely competitive market for electricity. Everyone agrees that because of the particular qualities of the electricity market, creating a competitive market means more than just lifting regulations, it means ensuring that a number of conditions are met.

According to the panelist from First Energy, one of the sentinel qualities of a competitive market is open access to transmission. That is, each competing provider must be allowed access to the lines to the homes of electricity customers. And that makes sense. The market can't be competing grids, it must be competing providers on one grid, even if one of the competitors owns the grid. Remember, this is the industry

Which is exactly what net neutrality advocates argue for. A truly competitive market for internet content must allow free access to transmission. With cable and phone competing, we have a less ironclad monopoly of the end of transmission, but we have the same barrier to perfect competition -- companies seeking to compete can't simply put up a new transmission grid. If the market for internet services is to remain competitive, content providers must have open access to transmission.

Arguments against net neutrality tend to use "regulation" as a boogeyman and/or argue by metaphor. That's smart tactically because in fact net neutrality regulation seeks to preserve a status quo that has worked pretty well so far. Up until now, net neutrality was guaranteed mostly because the technology didn't exist to allow network owners to discriminate based on content.

Now the technology is coming on line and network owners appear increasingly inclined to use it. Recently the usually prostrate FCC bowed to pressure and is investigating allegations that Comcast is blocking peer-to-peer traffic. And AT&T is considering monitoring traffic, purportedly to block protected intellectual property. In fact the move makes little sense except as a pretense to dismantle net neutrality.

Sometimes progressives favor regulation because we believe a competitive market brings unwanted side effects. But this is a case where regulation is needed not to blunt the effects of competition, but to ensure that the market remains truly competitive.