Law, Social Welfare, and Net Neutrality

The net neutrality norm generates wealth transfers from one type of internet content provider to another. In theory, these transfers might be socially desirable, and could be justified on the basis of informational externalities similar to those that have been identified to justify the fair use doctrine in copyright law. However, in practice, the conditions that justify fair use in the copyright context do not appear to hold in the settings in which the net neutrality principle operates. Moreover, the internal subsidization required by net neutrality generates a transfer from the relatively poor to the relatively rich. The potential welfare gains that might come from controlling anticompetitive abuse or government coercion through implementation of the policy can be achieved by alternative policies with less harmful consequences.