Thursday, October 03, 2013

Two Sides of the Internet’s Two-Sidedness: A Consumer Welfare Perspective

The FCC’s Open Internet rules have kept lawyers, government officials, industry groups, and scholars buzzing since December 2010. But last month, the oral arguments in Verizon’s case challenging the FCC's rules really fanned the flame. In that hearing, one argument was that broadband Internet providers are part of a so-called two-sided market, and that the Open Internet rules have a negative effect given this fact, particularly from a consumer perspective. Earlier this week, Justin (Gus) Hurwitz, a member of the Free State Foundation's Board of Academic Advisors and University of Nebraska law professor, focused on this issue in his piece “Two Sides of the Internet’s Two-Sidedness: A Consumer Welfare Perspective.”

Mr. Hurwitz explored whether broadband Internet providers are part of a two-sided market (or could be, absent the FCC rules), and how this factor will affect the development of the broadband Internet market – and ultimately how it affects consumers. He argues that whether ISPs are part of a two-sided market or not, “today’s broadband Internet market is precisely the sort of market in which the FCC’s ‘prophylactic’ approach is inappropriate.” Instead, the broadband Internet market is one in which “we should seek out opportunities to experiment with multisided price structure – and even reward firms for taking the risk of experimenting – in order to maximize the value of the Internet to consumers.” Overall, Mr. Hurwitz finds that the Commission’s Open Internet rules hinder the development of the Internet marketplace and result in harm to consumers.

If you had not had the opportunity to read the full piece, it is well worth exploring this clear and useful explanation of one fascinating element of the Open Internet debate.