Presenter: Wei Fulei, Juris Master, Class of 2018, Renmin University of China Law School

Network Neutrality, Consumers, and Innovation

Christopher S. Yoo, 2008 U. CHI. LEGAL F. 179 (2008)

Free Discussion:

Liu Xiaochun, Executive Director, Center for Internet Rule of Law, Chinese Academy of Social Sciences:

      I once attended a lecture delivered by Professor Yoo at Tsinghua University, which centered on network neutrality. Back then, I believed that the competitive conflicts between telecom carriers and internet service providers that network neutrality is designed to resolve were not a prominent issue in China. From today’s perspective, take China Mobile as an example: could it cooperate with Tencent to launch a dedicated data plan for Tencent’s applications such as WeChat, featuring ultra-low prices and abundant data allowances? Relying on its dominant market position, China Mobile could adopt differential pricing to nudge users toward WeChat rather than its competing apps. This line of reasoning applies to other related practices, including exclusive agreements and the “pick one of the two” mandate—these issues share identical underlying logic. Differential pricing was also covered in the previous lecture. Differential pricing has inherent merits and is not equivalent to discriminatory conduct; economic theories have repeatedly proven its efficiency. The summaries shared by fellow participants just now are spot on. Professor Yoo points out that differential pricing and exclusive agreements are not inherently harmful and can generate efficiency gains. Advocates of network neutrality, however, have failed to provide evidence proving that such practices lead to inefficiency or monopolistic dominance at the telecom carrier level. For that reason, I am inclined to agree that departures from network neutrality should not be presumed unlawful or inefficient from the outset. A uniform ex ante value judgment over such conduct is impractical. In my view, regulating network neutrality through an ex post intervention framework is far more reasonable.

      Much of the debate surrounding antitrust law ultimately boils down to the allocation of the burden of proof. A prerequisite for applying antitrust rules is substantiating market failure, and the burden of proof lies with the party seeking antitrust intervention. However, imposing an evidential threshold requiring a confidence level above 80% to establish market failure would set an unattainable standard. If such a stringent standard were enforced, effective antitrust enforcement in the internet sector would become nearly impossible. This is my understanding of Professor Yoo’s reasoning. His writings contain abundant economic theories worthy of reference, which can be applied to analyze practices such as the "choose one out of two" restriction.

      When discussing differential pricing, I think of railway ticket pricing as an analogy. Uniform flat pricing may leave low-income groups unable to afford tickets. By contrast, differential pricing, which charges higher rates for consumers with stronger purchasing power and discounted fares for those with limited means, can mitigate this issue and represents the most efficient allocation method. That said, differential pricing is not universally efficient under all circumstances. 

      As for the other paper, it mainly serves as a response to Professor Yoo’s arguments. In my opinion, it lacks constructive analytical content: the bulk of the text is devoted to refuting Professor Yoo’s propositions on departures from network neutrality, yet its counterarguments do not logically lead to the conclusion that network neutrality is the optimal regulatory standard. Even so, several theoretical frameworks laid out in that paper offer valuable insights into the widely debated “choose one out of two” conduct. Platforms often compete across multiple separate markets, and I am currently deliberating on how regulators should address the spillover of market power via cross-platform leveraging effects.

Zhang Jiyu, Associate Professor, Renmin University of China Law School:

      Regarding these papers on network neutrality, I have reservations about elevating network neutrality to a universal general principle. Yet if we regard it as a rule under antitrust law, network neutrality ought to be analyzed from perspectives including single-firm market dominance, collective market dominance as Professor Meng Yanbei discussed in last weekend’s lecture, and the competitive landscape of emerging markets. Professor Yoo regularly draws examples of innovative startups, arguing that rigid network neutrality rules risk stifling such new ventures. Such examples would no longer hold if network neutrality obligations only apply within narrow contextual confines, such as circumstances involving monopolization.

      Professor Yoo’s examples are highly thought-provoking, with the xbox case being one such illustration. Microsoft successfully penetrated and secured a foothold in the gaming console market by offering exclusive games for xbox. While Microsoft held monopolistic power across several technology sectors, it was merely a new entrant to the game console market at that time. Discussions over network neutrality largely revolve around whether platforms engage in discriminatory conduct against third-party applications. A classic discriminatory scenario central to network neutrality debates occurs where an internet service provider runs its own streaming services alongside its broadband business. Such an operator may throttle traffic delivered to rival media streaming providers to capture a competitive advantage for its own offerings. In my view, all such conduct can be fully analyzed and regulated within the existing antitrust framework. Nevertheless, Professor Yoo points out that market players may also build competitive advantages by launching exclusive complementary applications atop their innovative platforms. Such exclusive offerings may constitute necessary barriers to entry in platform competition. In this sense, one might argue that network neutrality is merely a high-profile lens for applying established antitrust frameworks to typical internet markets, rather than an entirely novel theory that can be indiscriminately applied to all scenarios. Most discriminatory practices can be examined and resolved through conventional antitrust doctrines. That said, certain related concerns extend beyond competition policy to touch upon fundamental civil rights. Take traditional postal services as an example: they are obligated to guarantee affordable service access for residents residing in remote areas.

      Professor Yoo offers abundant technical analysis to underscore that networks face congestion constraints—network capacity cannot be duplicated or expanded infinitely, a critical consideration that is often neglected.

      I lean toward examining network neutrality through a dynamic lens. To my mind, network neutrality cannot function as a uniform static principle applicable across all contexts; it must at minimum be subject to restrictive prerequisites.

Ding Xiaodong, Associate Professor, Renmin University of China Law School:

      Last time we discussed the concept of network neutrality coined by Tim Wu, which has since gained widespread recognition and acceptance. When it comes to the divide between proponents and opponents, most legal scholars endorse network neutrality, while Professor Yoo is one of the rare dissenters. Nevertheless, his position is not radical. He does not claim that violations of network neutrality are necessarily lawful; rather, he advocates resolving internet-related disputes within the antitrust legal framework. In contrast, many jurists argue that the antitrust framework alone cannot fully address such issues. They analogize broadband networks to essential public infrastructure such as water and power utilities, arguing that underlying internet access providers ought to remain neutral to all parties. Economists, by contrast, are more inclined to oppose network neutrality, as they have greater confidence in spontaneous market self-regulation. The legal academy, however, prioritizes fairness and justice and largely sides with network neutrality. Professor Yoo’s academic training is deeply rooted in law and economics, a background that likely exerts a substantial influence on his stance. All things considered, regardless of whether one agrees or disagrees with the arguments laid out in Professor Yoo’s papers, the breadth of literature he cites and the thoroughness with which he dissects relevant issues are well worthy of careful study and reflection.

      Another paper adopts a defensive line of reasoning. Its two authors start with the presumption that ex ante regulation enforcing network neutrality is desirable and should be upheld as a general rule, before proceeding to refute each drawback of network neutrality identified by Professor Yoo one by one. One of the authors, Schewick, has a distinctive academic background. She is German, earned her computer science degree from the Free University of Berlin, and later pursued her doctorate in the United States under the supervision of Professor Lawrence Lessig. In my opinion, Frischmann and Schewick’s counterarguments against Professor Yoo’s viewpoints lack sufficient persuasiveness, yet their theoretical insights and cited references are still valuable for reference.

      As we mentioned in our previous reading session, the debate over network neutrality derives from broader discussions on internet architecture, most notably the end-to-end principle. The original design principle for the underlying network infrastructure prioritized maximum simplicity, prohibiting packet inspection at lower network layers. This mindset has shifted nowadays. To draw an analogy with water supply pipelines, some advocate deploying smart pipelines that identify different water consumers and adjust water supply volumes accordingly, thereby creating an intelligent underlying infrastructure. Supporters of network neutrality oppose such a model, warning that pipeline operators would accumulate excessive power. Individual users and small and medium-sized enterprises would inevitably worry about whether they can secure an adequate supply of "network water". In this sense, network neutrality constitutes one of the most central research questions within cyberlaw.

Wang Xinrui, Attorney：

     Whether antitrust law should engage in ex ante market intervention boils down to evidentiary hurdles. These two papers were published a decade ago, so I am curious whether their core theories have been empirically verified or falsified over time. Looking back on the history of antitrust law from today’s perspective, I sometimes struggle to comprehend the heated antitrust controversies of past eras. The historic Microsoft litigation once captured widespread public attention, yet viewed in hindsight, the concerns voiced back then seem unfounded. Microsoft proved incapable of infinitely extending its monopolistic dominance into unrelated markets. I remain confused about what concrete harms stem from departures from network neutrality. Factually speaking, I wonder whether the long-running debate over network neutrality has reached a definitive conclusion, or if the controversy will persist indefinitely. From my perspective, none of the core risks flagged by advocates of network neutrality have materialized in reality, which raises the question: is targeted regulatory intervention still necessary? When antitrust cases unfold in real time, it is notoriously hard to tell right from wrong, yet hindsight yields unambiguous conclusions. I have always held firm to the view that practice is the sole criterion for testing the validity of legal theories.

Xia Jie：

      Debates over network neutrality lead me to ponder the tradeoff between equity and efficiency: we have to choose between prioritizing equity, or pursuing efficiency while accepting unfair outcomes for certain groups. To figure out whether platform neutrality disputes should be analyzed within the antitrust legal framework, we need to return to the origins of antitrust law itself. The Sherman Act of 1890 absorbed numerous doctrines from equity law. Jurists such as Posner have sustained long-running debates over the statute’s legislative intent. When we review a suite of laws and revisions enacted in 1914, including the Clayton Act and the Federal Trade Commission Act, it becomes clear that such legislation was deeply connected to the public opinion of that era. One major catalyst for the passage of the 1890 Sherman Act was the dominance of vital livelihood-related infrastructure sectors—including coal and electric power—by powerful trusts. However, by the 1950s, the Post-Chicago School developed an analytical framework for resolving such issues through economic analysis. Furthermore, I hold that the falsification methodology applied in natural sciences can hardly be transplanted into social science research. For example, is the rational person hypothesis in economics valid? Do rational actors truly exist? The multiplicity of variables at play in social sciences makes it extremely difficult to falsify any given theory. To a certain degree, public feedback on policies can serve as a yardstick to judge whether a policy is well-designed, and public sentiment can also drive the evolution of law.

     I recently read Guido Calabresi’s The Future of Law and Economics, which offered me valuable insights. He states in the book that it is extremely hard to pinpoint definitive conclusions within legal reasoning. One can readily find abundant justifications to support a stance, and by the same token, plenty of arguments to refute it. This forces legal scholars to turn to other social sciences for answers, yet those disciplines are trapped in the same predicament. Ultimately, we have to rely on ordinary citizens’ intuitive judgment to evaluate the merits of policies and regulations. If the public believes large corporations have undermined their wellbeing, the law must adjust accordingly. Legal development follows broad social trends rather than running counter to them. Therefore, I believe public opinion constitutes the decisive factor when deliberating whether to introduce relevant regulation on network neutrality in China. If the general public recognizes the profound value of network neutrality and a widespread social consensus takes shape, this will galvanize corresponding legislative progress.

Editor:Xu Liuya

Reviewer: Zhu Peiwen