Internet Regulations

For the past two decades, the Internet has operated as an unregulated, competitive free market. Given the tendency of networked industries to lapse into monopoly—think of AT&T's 70-year hold over telephone service, for example—that's a minor miracle. But recent developments are putting the Internet's decentralized architecture in danger.

In recent months, the nation's largest residential Internet service providers have been demanding payment to deliver Netflix traffic to their own customers. On Sunday, the Wall Street Journal reported that Netflix has agreed to the demands of the nation's largest broadband provider, Comcast. The change represents a fundamental shift in power in the Internet economy that threatens to undermine the competitive market structure that have served Internet users so well for the past two decades.

The deal will also transform the debate over network neutrality regulation. Officially, Comcast's deal with Netflix is about interconnection, not traffic discrimination. But it's hard to see a practical difference between this deal and the kind of tiered access that network neutrality advocates have long feared. Network neutrality advocates are going to have to go back to the drawing board.