Most Internet users don't know or care what "net neutrality" means or what it would do. They can now refer to the antitrust division of the United States Department of Justice, which on September 6 submitted a filing on net neutrality with the FCC.

Net neutrality means government regulation of the Internet, specifically a prohibition of differential charges for priority traffic. The Department of Justice thinks this is a bad idea, and would harm the development of the Internet.

"Free market competition, unfettered by unnecessary governmental regulatory restraints, is the best way to foster innovation and development of the Internet," says the DoJ filing.

"Free market competition drives scarce resources to their fullest and most efficient use, spurring businesses to invest in and sell as efficiently as possible the kinds and quality of goods and services that consumers desire. Past experience has demonstrated that, absent actual market failure, the operation of a free market is a far superior alternative to regulatory restraints."

Remember, this is the United States Department of Justice speaking, not the Milton Friedman Foundation or the economics department at the University of Chicago. The DoJ sees the Internet developing just fine without a new regulatory regime advertising itself as neutrality.

"It appears that the Internet is flourishing without the proposed sectoral regulation," explains the DoJ filing. "Statistics evidence an explosion in Internet usage in recent years due to new applications and increased broadband subscribership. According to press accounts, in June 2006 alone 2.5 billion videos were watched on YouTube; by May 2007, 'hundreds of millions' of videos were being downloaded every day.

Consumers increasingly are utilizing the Internet for everything from shopping, to news and information. E-commerce accounted for sales of $31 billion in the first quarter of 2007, an 18 percent increase from the first quarter of 2006. Internet advertising produced $16.9 billion in revenues in 2006, a 35 percent increase from 2005."

That kind of service requires investment, flourishing under current conditions, when broadband providers and ISPs can give priority to, say, streaming telemedicine video over video games. But such investment might not be forthcoming under a new regulatory regime, according to the DoJ filing:

"There is reason to believe that the type of regulatory restraints proposed by some commenters under the mantle of 'neutrality' could actually deter and delay investment and innovation, and result in less choice and higher prices to consumers of Internet services," the Department said.

In the lexicon of net neutrality, differential or priority pricing is called "discrimination," but the DoJ does not buy this rhetorical effort to seize the moral high ground.
"Differentiating service levels and pricing, for example, is a common and often efficient way of allocating scarce resources and meeting consumer preferences," the filing explains, using the United States Postal Service as an example. Consumers can send packages with a variety of delivery guarantees and speeds. These differentiated products, the DoJ explains, respond to market demand and expand consumer choice, and no one challenges their benefits. Further, "nor does anyone seriously propose that the United States Postal Service be banned from charging different fees for next-day delivery than for bulk mailers."

Net neutrality proponents enjoyed ample opportunity to show the FCC how current arrangements harm consumers but failed to make the case.

Two years ago, a consumer complained that Madison River, a small carrier in North Carolina, blocked a VoIP service. As the DoJ observed, "The FCC promptly addressed the issue and commenters submitted no evidence of any such blocking or other harmful conduct since this 2005 incident."

Net neutrality is the latest slogan of the "digital divide," the notion that new technology instantly creates new legions of haves and have-nots, an emergency situation caused by the market and requiring new regulation. Yet, in their filings with the FCC, organizations such as the NAACP and Jesse Jackson's PUSH coalition did not call for net neutrality, only for expanded access. That is happening now, and without one-size-fits-all regulations, Internet ubiquity and diversity will continue to unfold. That will come about through differential pricing, just like that practiced by the U.S. Postal Service.

"No one challenges the benefits to society of these differentiated products," the DoJ filing said. "Whether or not the same type of differentiated products and services will develop on the Internet should be determined by market forces, not regulatory intervention."

K. Lloyd Billingsley is editorial director of the Pacific Research Institute, and author of Net Gains or Net Losses: The Net Neutrality Debate and the Future of the Internet, released by PRI in August.