O'Reily's Radar has an interesting discussion of "Net Neutrality: Rules and Principles," with links to a number of comments and posts.

OR's summing up:

Overall, the disputants fall into two camps, based on which of two principles (the end to end nature of the current internet, or the power of markets to set efficient pricing) seems more important to them. So ultimately, even though Chris Savage made the distinction between rules and principles, we still need mechanisms for deciding about the relative importance of competing principles.

Ronald Coase got the Nobel Prize in economics for showing (among other things) that if you set up a clear system of property rights in essentially any conflicting-use situation, the parties will use contracts to allocate the resource in question to its most efficient use. This is the famed "Coase Theorem" announced in a 1960 article called "The Problem of Social Cost."

It turns out that Coase actually came upon his theorem -- or at least the insight underlying it -- in a 1959 paper called "The Federal Communications Commission," in which he explained why and how a market allocation mechanism would work properly for spectrum.

Markets are not perfect. But they do what they do -- allocate scarce resources among competing uses -- better than anything else we know about. It may be that there are technical considerations that require some constraints on unfettered market allocations (I'm not an engineer; I am a lawyer; and I'm sort of an economist, at least through undergraduate training and lots of regulatory/antitrust practice).

Since Coase is right as a general matter (anyone care to take him on? No one has done so successfully over the last 40 years), I'd put a very heavy burden on someone claiming that some technical issues preclude the use of markets to allocate spectrum (or any other scarce resource).

posted by James DeLong @ 10:16 AM | Telecom

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