Listening to the Republicans in Congress, one might think that the Keystone XL pipeline is the biggest energy issue facing the country today and that swift approval of the controversial project is vital to America’s interests. Election-year politics aside, however, the merits of the case for the pipeline have been eclipsed by changing circumstances.

When the project was first proposed and the political battle lines were drawn, America was importing significantly more oil than we were producing. That is no longer the case. Thanks to the boom in shale and unconventional oil production, the United States is on the verge of becoming the world’s largest oil producer. From an energy security and geopolitical perspective, the Keystone pipeline has become largely irrelevant. The question today is not whether we should import heavy crude from Canada (supposedly as an alternative to importing from less friendly countries). The critical question today is what American should do with the glut of oil we are producing ourselves.

The arguments for the pipeline are rupturing. We no longer need Canada’s tar sands oil to enhance our “energy security.” This claim rested on the specious notion that having access to large sums of crude from close by would cushion U.S. consumers from price shocks at the pump. Even if this were true, the last time I checked North Dakota was closer to home than Alberta.

The only serious argument left to Keystone proponents is that building the pipeline and processing Canadian crude in the United States will create jobs. Given our painfully slow recovery, of course, that is not an argument to be taken lightly. But America’s new energy reality points to a different path toward a renewal of national prosperity. Instead of building a pipeline to import another country’s heavy and difficult crude, we should build pipelines to safely and economically move America’s own lighter, sweeter crude to market. Investing in revamped refinery capacity that is more suited to processing our own oil, as opposed to the heavy oils of Canada and Venezuela, would not only create jobs, but would be more consistent with our new place in the energy world. Such a course would make it easier to balance the twin imperatives of spurring domestic economic growth and competitiveness and lowering U.S. greenhouse gas emissions.

On the merits, we should put this anachronistic debate to bed. We have far more important energy policy questions to discuss that are actually rooted in the facts and circumstances of today.
Should we lift the ban on exports of petroleum? This issue raises a host of questions, but global oil market dynamics suggest that the ban is itself anachronistic. I have concerns that added incentives to extract domestic oil could have negative environmental impacts, but we can manage those and can extract great value from our domestic resources without sacrificing environmental best practices and without opening up currently protected areas to development. Further, I am attracted to the idea of dedicating a fraction of export revenue to conservation and clean energy (which we did when we opened up offshore resources), as the think tank Third Way has proposed.

Can we come to consensus on natural gas exports in light of new resource and global political realities? I favor exports, but not at the expense of reasonable environmental safeguards around fracking that will not in any significant way deter responsible developers from producing the resource.

And we must put climate change back on the national energy policy agenda. If the Keystone debate has served any purpose, it has helped opponents raise the volume (if not always the quality) of the discourse around climate. XL opponents feel strongly that America should not abet exploitation of the difficult-to-develop and energy-intensive tar sands, lest we be complicit in the negative climate impacts that would result. I happen to agree with that argument, but the real question now is this: As U.S. oil production surges, why should our political leaders keep fighting over a project we simply don’t need?

While it likely won’t happen until the silly season of the midterm elections is over, we need to focus our energy debates on the issues that matter today. That will be enough of a challenge without spilling blood over yesterday’s battles.

This op-ed was originally published by Real Clear Politics, read it on their website here.

The Netflix–Comcast arrangement has brought fresh accusations of so-called “net neutrality” violations. The flames were stoked when Netflix’s CEO, in a blog posting, bemoaned the plight of “intermediaries” such as Akamai, Cogent, and Level 3; he advocates new “net neutrality” rules to prevent Internet service providers (ISPs) from charging a toll for interconnection to these Internet middlemen. Some commentators fear that, if direct connections between ISPs and content providers such as Netflix proliferate, Internet middlemen “will become mere resellers of access” or “may be cut out of the loop altogether.”

In light of the D.C. Circuit’s decision in Verizon v. FCC , which rejected the FCC’s effective prohibition of payments from content providers to ISPs, a widespread acceptance is emerging for case-by-case review of discrimination complaints by a content provider against an ISP. In this middle ground, pay-for-priority deals would be tolerated but the arrangements would be policed for abuses by the FCC. Should the same protections be extended to resolve interconnection disputes involving Internet middlemen?

Although I accept the case for regulatory protections of content providers, the FCC may not be the right venue to deal with the antitrust and political aspects of interconnection disputes involving Internet middlemen. Before explaining why, however, a brief refresher on how we got here is in order.

The term “net neutrality” was first coined by Tim Wu to describe a world in which all packets on the Internet are equal and should be treated that way by ISPs. This vision implies no favoritism of an individual content provider’s packets over another’s. And the strong form of net neutrality implies that if there is priority treatment of a content provider’s packets, it should be priced at zero.

Peering arrangements between networks have always been outside the purview of net neutrality, because the FCC had expressed the view for years that the backbone market was competitive and not in need of regulation. In their dealings with ISPs, Internet middlemen such as Cogent carry the packets of myriad content providers, making discrimination vis-à-vis an individual content provider impractical. Moreover, unlike “settlement-free” peering, exchanges of unequal amounts of traffic between two networks have involved positive prices for years, which is also inconsistent with the zero-pricing principle of net neutrality. Accordingly, the FCC did not extend net-neutrality protections to peering arrangements in its Open Internet Order (see footnote 209).

Flash forward to the Netflix-Comcast arrangement, which bypasses the middlemen. To the extent that such direct connections become the new norm, these intermediaries may find themselves marginalized, or even obsolete. What role, if any, should the FCC play in preventing such a development? Stated differently, should ISPs be forced to deal with these middlemen at regulated interconnection rates?

The answer to this question can be informed by a limiting principle that should define the scope of the FCC generally: Is there some important social objective not recognized by antitrust laws for getting the FCC involved in these affairs?

Setting aside any of the particulars of the Netflix-Comcast arrangement, an ISP could make life difficult for these middlemen by requiring content providers to purchase data transport or content delivery services (“middle-mile services”) from the ISP as a condition of getting access to its customers (or getting a working connection). As a variant of this strategy, an ISP could refuse to supply terminating access to middlemen, forcing the content provider to deal directly with the access provider.

It is not clear how additional protections for these middlemen, above and beyond those afforded by antitrust laws, would advance any important social objective: Why is it a good thing to promote standalone providers of these middle-mile services via regulatory protection? Unlike content providers, who generate positive spillovers (information and artistic content can be viewed as “public goods”) and thus cannot be expected to monetize their investment, the Internet middlemen are more akin to resellers of a homogenous product (data packets), and are likely to capture the entire value-added of these services.

The best justification I can conceive for the FCC’s providing a backstop for these middlemen is that it is better for providers of these services to be independent from the provision of broadband access, because their independence ensures that content providers will get “better” treatment in middle-mile services. But the question of whether this “better” treatment is a worthy social objective is really a political judgment that should come from Congress, not the FCC.

To the extent that independent firms can provide middle-mile services at a lower cost than ISPs, basic Coasian economics predicts that market forces should ensure their survival. Why would Comcast, in its “make or buy” decision, exclude Akamai from the market if doing so would impose higher costs on Comcast? Over the last three months, Akamai has outperformed the Nasdaq index (a 30% return versus virtually no return), indicating that financial markets are not discouraged by these direct, pay-for-priority developments.

Moreover, to the extent any exclusionary conduct by an ISP leads to higher prices or lower output, the antitrust laws offer all the protection these middlemen need. Competition laws were designed to prevent, among other things, a dominant firm from leveraging its market power from one market (broadband access) into another (data transport or content delivery service). Because these cases could get a serious hearing in an antitrust court, middlemen do not need any additional regulatory protection.

In what appears to be a plea for regulatory intervention, Cogent’s CEO recently claimed that ISPs “are attempting to leverage their monopoly on broadband residential Internet connections to increase their profits by imposing tolls on traffic requested by their customers and delivered by other Internet service providers.” Although such comments likely caught the telecom regulator’s attention, by articulating an antitrust claim, Cogent made a pretty good case for why no FCC involvement was needed.

The case for preemptive protections for Internet middlemen is ultimately based in politics, rather than economics. Either we let the market naturally develop and let middlemen live or die on the economic merits, or Congress bans vertical integration in this space because it produces a political outcome we cannot tolerate. There is no added economic benefit for the FCC to dicker around the margins.

This article was originally posted by Forbes, read it on their website here.