Policy Note 38: Considering the negative consequences of net neutrality

The term "net neutrality" has extremely positive connotations in the public debate. It is associated with the image of a non-discriminatory internet and the hope that net neutrality regulation will promote the development of new internet services, which in turn will lead to increasing demand and ultimately to further investment in broadband infrastructure. Accordingly, the European Net Neutrality Directive currently imposes comparatively strict regulation, which prohibits providers of broadband internet services from differentiating in terms of price and quality and from pricing internet usage on the part of internet services or content providers. "Despite the extremely positive image of net neutrality in the public debate, the negative consequences of regulation have so far been insufficiently taken into account," says Wolfgang Briglauer, Head of Digitalization and Regulation Research at EcoAustria.

Extensive research shows that strict net neutrality regulation has a negative impact on investments in network infrastructures and tends to increase consumer prices. Without net neutrality regulation, the opportunities and incentives for providers of broadband internet access services to invest in new infrastructures are higher. In addition, network operators would not have to pass on the costs exclusively to the end consumers of internet services, but could also charge service providers for the use of the internet. "Due to the negative effects on investments and consumer prices, the current net neutrality regulation in the EU should be critically scrutinized and adapted," emphasizes Briglauer. Instead of strict net neutrality regulation, it would make more economic sense to give providers of broadband internet access services more pricing and quality options. This should be combined with the possibility of sanctions should cases of abusive discrimination actually occur, concludes an EcoAustria Policy Note published today.