FCC Workshop Participants Offer Little Support for the Commission’s Intentions to Impose Internet Regulations

Last weeks FCC workshop was focused on economic issues in broadband competition . The Commission invited academic experts and senior competition policy officials from the Federal Trade Commission and the Department of Justice to address one of the foundations of the FCC’s clear intention to impose a variety of new regulations on broadband network and services providers. The panel offered little if anything to support the Commission’s current inclinations.

A keystone in the case for more regulation is that the “market” has “failed” to provide consumers protection from the exercise of monopoly power. Given the resources committed to making the case for regulation, the evidence for that is surprisingly both narrow and shallow. It is summed up in significant measure by repeated assertions about “cozy duopoly” of cable and telco broadband network providers – and this notwithstanding the lack of any evidence of a factual nature that duopoly generally leads to unsatisfactory performance .

The structure of the questions posed to the panel invited responses finding market failure and the need for more regulation. Unfortunately, the panel did not offer much in the way of facts about the extent of concentration and almost nothing about what consumers really care about, namely, recent wireline and wireless market performance reflected in enormous new investment, new and improved service offerings, and falling prices. (As Casey Stengel famously said, “You can look it up”) Panelists variously referred obliquely to monopoly power while others noted that many consumers have several choices. Clearly the extent of competition varies from market to market and is (surprise, surprise) the least vigorous in outlying areas where loop lengths are long, households scattered, and unit investment/operating costs prohibitive for wireline platforms.

Panelists addressing the issue agreed that wireless platforms are significant potential competitors, but that more spectrum will likely be needed to enable its timely and economic expansion. The Commission can draw support for requiring greater disclosure by platform providers of service terms. Panelists addressed issues related to bundling, vertical integration, and price discrimination, but notably no panelist supported regulation on those grounds and some in fact found no basis in them for the Commission’s regulatory intentions.

All in all, a fair assessment of the content of the discussion suggests little basis for disagreement with what we wrote last summer in BusinessWeek, “Federal, state, and local governments should create an environment that will attract financial investors and induce company managers to use cash to develop high-speed networks. High taxes, intrusive price regulation, and competition from government-financed networks are inconsistent with a rational broadband policy rooted in private investment.”

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