If the merger is approved, New T-Mobile likely will be a stronger competitor to Verizon and AT&T, the current wireless market leaders. As we explained in our comments and reply comments submitted to the FCC, in today's dynamic communications marketplace, it is wrong to suggest, simplistically, that effective competition will suffer as a result of a "four-to-three" merger of the leading wireless broadband providers. Indeed, today, wireless and wireline broadband services are more properly viewed as part of an overall broadband communications market – a broader broadband market, if you will.
Wednesday, February 13, 2019
T-Mobile/Sprint Merger Bolstered by 5G Benefits and Price Commitments
If the merger is approved, New T-Mobile likely will be a stronger competitor to Verizon and AT&T, the current wireless market leaders. As we explained in our comments and reply comments submitted to the FCC, in today's dynamic communications marketplace, it is wrong to suggest, simplistically, that effective competition will suffer as a result of a "four-to-three" merger of the leading wireless broadband providers. Indeed, today, wireless and wireline broadband services are more properly viewed as part of an overall broadband communications market – a broader broadband market, if you will.
Monday, July 29, 2013
Washington (DC) Should Follow Washington (State)
For well more than a decade now the jurisdictional line between interstate and intrastate communications has become increasingly blurred. As communications have moved from narrowband to broadband networks, and from analog to digital platforms, with transmissions circumnavigating the globe in little more than nanoseconds, at times it can become impractical, if not impossible, to determine whether a transmission is properly classified as an interstate or intrastate communication. In any event, implementing such jurisdictional separations can be costly.
Accordingly, for many years I have expressed concerns regarding the ability of the states, through the exercise of their jurisdiction over intrastate communications, to impede the development of modern telecom networks through overzealous regulation. Because intrastate and interstate communications travel over the same networks, the FCC and the states share jurisdiction over the same physical plant. So an unnecessarily burdensome, unduly costly regulatory regime in one jurisdiction may affect the delivery of telecom services in the other by impacting incentives to invest in upgrading and building-out networks.
Tuesday, October 30, 2012
Every Movie Ever Made
Sunday, May 13, 2012
Propelling the Internet Backwards in Time
Monday, October 19, 2009
No "Public Option" for the Internet
The FCC is poised to consider initiating a new rulemaking this Thursday that, in one form or another, would impose new net neutrality mandates. I understand that any new regulations adopted, in theory, may be more or less intrusive. Indeed, I appreciate that FCC Chairman Julius Genachowski declared in his Brookings Institution speech that the FCC "will do as much as we need to do, and no more, to ensure that the Internet remains an unfettered platform for competition, creativity, and entrepreneurial activity."
With respect, this statement of professed regulatory modesty – to get the regulation "just right" on an ongoing basis – is inconsistent with normal bureaucratic imperatives at work once a prescriptive regulation is adopted. The notion that the Commission will get the Internet regulation just right on an ongoing basis indicates a regulatory immodesty inappropriate in such a technologically dynamic market segment.
Now, Chairman Genachowski may, in his own mind, lean toward a less intrusive public option for net neutrality regulation than other advocates. But the most rabid net neutrality supporters have no such leanings. They will continue to press, before and after the adoption of new regulations, for the most rigidly intrusive regime. Indeed, as I pointed out back in August, Robert McChesney, a founder and board member of the Free Press organization, the staunchest net neutrality proponent, recently said the following in an interview with "The Bullet," a publication of the Socialist Project: "What we want to have in the U.S. and in every society is an Internet that is not private property, but a public utility. We want an Internet where you don't have to have a password and that you don't pay a penny to use. It is your right to use the Internet."
Professor McChesney's extreme vision of the public option for the Internet hopefully is not shared by Chairman Genachowski or a Commission majority. But the real point is this: Once the FCC bans all form of "discrimination" by Internet providers, as it apparently proposes to do, it will have taken a significant step in the direction of converting the Internet into McChesney's public utility. The non-discrimination ban at the heart of net neutrality regulation is the same non-discrimination prohibition that is at the core of public utility regulation.
In the last week or so, there has developed a broad array of opposition to the adoption of net neutrality regulation. The opposition comes from unions (CWA and IBEW), the business community (the National Association of Manufacturers and the U.S. Chamber of Commerce), Internet equipment and services suppliers like Cisco, and members of Congress from both sides of the aisle (House Democrats and Republicans, and Senate Republicans).
A perusal of these letters will reveal, at bottom, this fundamental commonality:
· At present, there is little credible evidence that there is any "market failure" problem or existence of abusive consumer practices for which prescriptive government regulation is warranted. The three or four claimed examples of such potential abuses were all addressed absent prescriptive net neutrality regulations. Note that in the quote above, Chairman Genachowski says he wants "to ensure that the Internet remains an unfettered platform for competition." He doesn't say it is not now one.
· Absent a market failure and evidence of marketplace abuses that threaten consumer welfare, preemptive government regulation is likely to stifle incentives for continued investment in broadband networks and innovation in the entire Internet ecosystem.
· Unlike other segments of the economy, even in difficult economic times, just in the last two years the broadband providers have invested over $200 billion of private capital in building out and enhancing their broadband networks, without seeking government guarantees of bailouts.
As the newly-constituted FCC under Chairman Genachowski nears its rulemaking decision, it should adopt a considerably more modest mind-set, one that takes account of both the agency's own past history of regulatory over-reaching and an appreciation of the changing dynamics of today's digital environment.
What the FCC needs at this point, frankly, despite its oft-repeated mantra, echoed by industry, is not more and more data. Unless the agency is going to be making decisions, ordinarily reserved for the private sector, concerning the amount and timing of capital investment, the pace of new innovations and technological roll-outs, projected consumer demand for new services and applications, and the like, it already has more than enough data (which, by the way, becomes outdated very quickly in a dynamic market) to know that there is no need to adopt new Internet regulations.
Until there is a demonstrated market failure, the FCC would be well-served to have uppermost in mind certain regulatory principles and approaches -- cost-benefit analysis, the precautionary principle, the law of unintended consequences, and the laws of the bureaucratic imperative and the slippery slope – all of which should dictate a high degree of regulatory modesty.
Tuesday, September 22, 2009
Richard Epstein on Net Neutrality
But more importantly for the moment, please consider carefully the last paragraph (reproduced below) from Professor Epstein's chapter in the Free State Foundation's new book, New Directions in Communications Policy, published by Carolina Academic Press. Richard's chapter is titled, "What Broadcast Licenses Tell Us About Net Neutrality: Cosmopolitan Broadcasting Corporation v FCC." In it, he shows -- brilliantly, as usual – what one piece of the FCC's history of broadcasting regulation teaches us about the perils of net neutrality regulation.
In his summary and conclusion, Professor Epstein explains that we ought to be able to distinguish between regulations that strengthen markets and those that undermine them, but that there is a long-standing pattern of government's failure to do so. The regulators' proclivities to overreach are often driven by a denigration of property rights and systems of voluntary exchange. So here is how he concludes his chapter:
"A similar pattern is at work in the modern debates over net neutrality. The defense of that position starts out as a plea to end discrimination. Yet there is little evidence that the new dose of regulation will produce any gains in the short run. In the long run, we can expect a repetition of the sorry performance of the FCC (or, for that matter, Congress) with respect to broadcast rights to work its way through the law of net neutrality. The sad truth is that the parties who seek to develop sophisticated and sensible schemes for state control quickly lose control over the administrative process to persons whose ambitions for state control are not bound by any fine-grained rationale. The dangers for this predictable drift usually suffice to err on the side of caution. Stated otherwise, the expected rate of depreciation of sound public norms that rely on administrative discretion is high. There are too many pressure points to keep the rascals at bay. So the recommendation here is to follow classical liberal principles that treat all state intervention as a mistake until it is shown to be a good. More practically, and much to the point of the current public policy debate: Keep private control over broadband pipes by abandoning the siren call for net neutrality."
Having in mind even a bit of regulatory history, it is difficult to put more concisely the case against net neutrality mandates that FCC Chairman Genachowski intends to have the FCC impose.
I wish those FCC commissioners considering new Internet regulation would stop for a moment and think about Professor Epstein's warning:
"The sad truth is that the parties who seek to develop sophisticated and sensible schemes for state control quickly lose control over the administrative process to persons whose ambitions for state control are not bound by any fine-grained rationale."
Tuesday, September 15, 2009
FSF Conference Video Posted
The keynote addresses of FCC Commissioner Meredith Baker – her maiden FCC address – and Blair Levin, the Coordinator and Executive Director of the FCC Omnibus Broadband Initiative, deservedly, have garnered much press attention. It's worth emphasizing that the presentations of Professors James Speta, Christopher Yoo, and John Mayo not only were scholarly, as one might expect from these prominent scholars, but they were informative, interesting, and entertaining as well. Looking out into the audience while they were speaking, I was struck – nearly dumbstruck – that the berries, pods, and other assorted handheld devices, had all but disappeared.
Both Jim Speta and Christopher Yoo, in the context of addressing the FCC's decision last year in the Comcast file-sharing case now on review, discussed both procedural and substantive failings in the way the FCC handled the case. While their focus was principally on net neutrality and the agency's decisionmaking process, the cautionary note they sounded concerning the perils of regulatory overreach, and the potential consumer harms from such overreach, has more general applicability as the Commission considers other competition issues. Similarly, John Mayo's discussion of the urgent need for universal service reform, while cogently making that case, does double duty as a basic refresher, for those in need, of some fundamental economic principles.
In other words, the video contains much useful and thought-provoking information, and much for the new FCC to consider as it gets ready to tackle formulating the broadband plan and addressing other communications issues. So, as they invariably say in New York, when they bring your hot pastrami sandwich and pickle: "Enjoy!"
PS: As I said at the conference, there is 20% discount for Free State Foundation friends and family on FSF's new book, New Directions in Communications Policy, published by Carolina Academic Press. In addition to Professors Speta, Yoo, and Mayo, other contributors to the book are: Professors Gerald Brock, Diane Disney, Richard Epstein, Bruce Owen, Glen Robinson, Dennis Weisman, and Steven Wildman. They are all members of FSF's Board of Academic Advisors. The secret code for the discount is COMM20 – but don't spread it around too freely. You can order the book on CAP's website here, or call 800-489-7486.
Monday, September 14, 2009
The Fiction of Forced Access
Adam has always contributed greatly to the fight against "forced access" regimes in the broadband world, and, as usual, his latest piece, "Fiction of Forced Acccess 'Competition' Revisited", is well worth reading.
Saturday, September 12, 2009
When Friends Agree to Disagree:Data and Regulatory Philosophy
I think Blair will agree – and indeed he said so in his remarks at the conference – that he considered our exchange, now carried on, and perhaps magnified a bit, in the press, valuable in helping to think about the development of a broadband plan that best serves consumers and the overall national interest. You can read the reports about the conference in Communications Daily [subscription required], Broadcasting & Cable, and TR Daily [subscription required] to get a flavor of the exchange.
As background, I had been quoted earlier in Communications Daily as saying that while I thought the broadband workshops had been useful, I would like to see, in addition to the Commission's ongoing emphasis on data-gathering, more focus on what regulatory philosophies or models work best. In my introduction of Blair on Thursday, I said:
"Certainly, the essays in the New Directions book contain considerable data concerning broadband subscription, the number of competitors, the growth in USF funds, and the like. I agree, of course, that it is important for our public policymakers to have good, reliable data as they make decisions – and I bet our opening keynoter, a very key player at the FCC, might make the point that the new Commission is going to be 'data-driven,' and that it needs good data to develop a broadband plan. True enough."
And then I went on to say:
"But the development of sound policy truly does depend on what you do with the data, how you interpret it. Here's an example. Free Press says that prior to the abandonment of the FCC's sharing requirements for the incumbent telcos' lines there were 6000 ISP competitors in the country and now, as a result of deregulation, there are less than a dozen. Well, that is true only if you don't recognize as a matter of regulatory policy the important distinction between facilities-based competition and competition based on regulated resale, and if you don't think it makes any difference whether competition is facilities-based or resale-based. So if you take the 6000 figure at face value and run with it, you would be making a big mistake, in my view, in terms of developing sound policy. Indeed, the development of sound policy depends on having good data and having a good understanding of the economics of network industries and, in the case of communications policy, especially of the dynamic nature of technological change in the marketplace."
During his presentation, which is now posted on the FCC's Blogband website, Blair made several points responsive to my contention concerning the need for some focus on regulatory models and perspectives. I agree with much of what he said. For example, Blair said that if the FCC doesn't get data on who is unserved, where they are, and what it costs to build out a network to serve them, "you are going to get the wrong answer no matter how thoughtful your philosophy." Agreed. He also said it is not the staff's role to focus on regulatory policy, but rather the Commission's. I agree, of course, that it is the Commission's role, ultimately, to establish regulatory policy. But I think it is also the staff's role, with its expertise and the tools available to it, to facilitate the commissioners' understanding of how various regulatory policy and perspectives may impact their decisions. In my view, the broadband workshops would be one appropriate way of doing so, along with others. But I don't disagree with Blair's statement that the fact-finding comes first, during what he called "the early stages of a policy process." After all, he did state that we "will get to that point in the dialogue when philosophy does matter, where different views about the appropriate role of the public sector will be germane to the issues."
Thus, on this matter of the intertwined relationship between "data" and "regulatory philosophy," in reality our differences probably are not that large, especially as Blair agrees that there is a point in the process – before decisions are made – where "philosophy does matter," when the appropriate role of the public sector is germane. (There is a reason why FSF's masthead proclaims "Because Ideas Matter.")
Let me illustrate a couple of instances in which good data certainly matter, and an instance in which regulatory perspectives or philosophy matter, and why in this latter instance being "data driven" in and of itself is insufficient to lead to sound policy.
In my comments filed with FCC on the plan, I urged that the priority should be the targeting of federal support for the deployment of broadband facilities in presently unserved areas. If deploying broadband to unserved areas is a priority, and it should be, it is necessary to have good (which is not the same as perfect) data that indicates which areas presently lack service. Fortunately, through the now prevalent ongoing mapping exercises, to the extent that such data previously was unavailable, it is now quickly becoming ever more so.
With respect to increasing adoption, an objective I consider consistent with the development of a sound broadband plan, having good data is also important in many respects. For example, in my comments I suggested it may be appropriate for the government to subsidize the purchase of computers by low income persons as a means of promoting more widespread adoption. Whether this makes sense or not, or the extent to which it does, depends on having sound data concerning computer ownership by low income households, the number of persons affected, the cost of the computers and the like.
And regarding adoption, there is good data, especially from the Pew Internet and American Life Project, showing that, while there are many non-financial reasons for non-subscription to broadband, for some the principal reason is related to income. FSF Distinguished Adjunct Fellow Deborah Tate, who chaired the Federal-State Joint Board on Universal Service while serving as FCC Commissioner, recently advocated in a Baltimore Sun commentary that the Lifeline/Linkup program be changed to provide support to low income persons for broadband subscriptions. Again, having good data on the extent to which income level correlates with broadband subscription, and the extent to which a particular level of financial aid is likely to correlate with an increase in take rates, is useful in developing sound policy in this regard.
So, these are examples where good data points are necessary if policies designed to increase deployment and adoption are to be implemented in the most effective and efficient way.
Now, consider an instance in which regulatory perspective and philosophy matters a lot. As I said on Thursday, Free Press has suggested in its Dismantling Digital Deregulation paper that at one time there were 6000 Internet Service Providers in the country and that the average American consumer had access to more than a dozen ISPs. As a result of the FCC's abandonment of DSL line sharing and wholesale price regulation policies around 2003-2004, this story line goes, only a handful of the 6000 ISPs remain and consumers no longer, on average, have access to a dozen ISPs. Well, in deciding how to interpret this data, how to process it, here regulatory philosophy matters a lot.
Let's assume for the sake of argument that the 6000 figure for the number of independent ISPs is an indisputable fact. Nevertheless, I would not want the FCC's development of a broadband plan to be "data driven" (in the wrong way) by this particular data point. Rather, I would want commissioners to understand that the 6000 ISPs existed merely at the sufferance of an agency policy of "managed competition" through regulated common carrier resale, and that such a "managed competition" policy does not provide incentives either for the incumbent providers to upgrade their networks or for the so-called "competitors" actually to build out their own network facilities. And I would want them to understand that, in the long run, which is what matters, consumers benefit more from facilities-based competition that supports sustainable competition than from managed resale that does not support sustainable competition.
And here is the key point: In deciding whether to recommend returning to the common carrier/net neutrality/open access regulatory regime advocated by Free Press and others, or whether to adhere to the deregulatory broadband policies the Commission largely adopted five or so years ago, what matters in reaching the right decision is not only knowing the 6000 ISP data point. Rather what matters is having in mind a regulatory philosophy that enables one to understand why this particular data point should not be considered a reason for supporting a common carrier regulation in light of the difference in investment and innovation incentives created by facilities-based and non-facilities-based competition. This is what I mean when I say that, in developing the broadband plan, the commissioners should have in mind a regulatory philosophy.
Commissioner Meredith Baker, who delivered the closing keynote at Thursday's conference, was most eloquent in speaking to the importance of having both good data, what she called "fact-based evidence," as well as a regulatory philosophy grounded in free market principles. In her speech, titled, "Incentives Matter: Decision Making at the FCC," Commissioner Baker said that having "good data is critical," especially with respect to what ought to be the highest priority in broadband policy, "to get broadband to all remaining unserved areas of the country." (As stated above, I fully agree this should be the top priority in the plan.)
As for regulatory principles, Commissioner Baker said she starts "with an assumption that markets work better than government intervention and that competition regulates market behavior more efficiently than regulators can." This is a simple but fundamental "first principle," but not one to which everyone subscribes, certainly not those parties urging the Commission to impose common carrier regulation on broadband ISPs. Commissioner Baker added: "[M]ost importantly, I believe incentives matter. Actions government takes –or doesn't take – affect market behavior and create incentives. I recognize that nearly any regulatory change the Commission makes will disturb the balance of the market—maybe for better, but possibly for worse. Therefore, our decisions must be fact based, fully considered, and reasoned. Good intentions are not enough."
Speaking more specifically about the analytical framework she proposes to use in reaching policy decisions, Commissioner Baker identified these elements: (1) identify objectives when launching proceedings; (2) look to the statute; (3) understand the context of the policy at issue; and (4) weigh the costs and benefits of any decision, including the potential unintended consequences. This last element is critical, because if the wrong balance is struck, "we risk imposing costs and other regulatory burdens on providers." That raises prices, reduces quality of service, and harms innovation, outcomes that "damage consumer welfare and endanger economic growth in the dynamic sector of the economy at a time when we can least afford it."
The upshot is this: The extent to which one starts with a basic assumption that markets work better than government intervention or the other way around is part and parcel of a regulatory philosophy. Whether one embraces cost-benefit analysis, or appreciates the law of unintended consequences, or the principle of "first, do no harm" is part and parcel of a regulatory philosophy. So is the extent to which one accepts, especially in regard to communications markets, the power of Schumpeterian dynamism to change markets, as opposed to embracing a static or snapshot market view. And while it is easy to hypothesize that regulators should "let go" of regulation at just the right time as competition becomes more robust, one's regulatory philosophy influences whether one believes the error costs of waiting too late generally exceed the error costs of deregulating too early. These are but some of the ways in which one's regulatory philosophy is brought to bear on analysis of available data.
In my view, as Commissioner Baker articulated so nicely, a regulatory philosophy grounded in an understanding of free market principles best serves consumers. As I said in my comments to the Commission back in June, the broadband plan should be grounded firmly in such principles.
I am grateful to Blair Levin for his thoughtful and thought-provoking remarks at Thursday's FSF conference. It is true we don't always agree, but we always learn something by listening to each other. As Blair said on Thursday: "One of the nice things about friendship is it does not require agreement." I agree.
And, finally, I am very grateful to Commissioner Baker for delivering her maiden address at the FSF conference, and for doing so after flying back all night from Brazil to do so. Her keynote will repay many times those who read it closely, as I have several times.
PS – I should add that, by all accounts, the presentations of the three scholars – Jim Speta, Christopher Yoo, and John Mayo – were extremely informative and useful. More about these terrific presentations when the transcript is released. In the meantime, you will be able to watch them on the video soon if you missed attending the conference.
Friday, August 14, 2009
Interesting, But Deeply, Deeply Flawed
The OECD's broadband rankings have been misused by those with an agenda to talk down the progress the U.S. has made during the last decade in making broadband available. Now over 90% of America's households have access to broadband, with a subscription rate of 60%. The agenda -- to drive policymakers towards exercising much more regulatory control over, and even government ownership of, Internet networks -- is not subtle or hidden.
At a June 5 Free State Foundation seminar, Ambassador David Gross, State Department's immediate past U.S. Coordinator for Communications and Information Policy, stated: "Almost everyone agrees that the OECD's broadband statistics are useful and certainly interesting. However, virtually everyone agrees that they are deeply, deeply flawed." And, true to his title, Ambassador Gross was probably speaking diplomatically. The transcript is here.
Now comes the OECD with a new report that purports to show that the prices paid by U.S. consumers for wireless services are higher than those paid by consumers in many OECD countries. Perhaps the report is interesting, but it also looks, like the broadband reports, to be "deeply, deeply flawed."
The fundamental problem is that the OECD assumes, for purposes of determining price values, hypothetical usage packages that do not reflect the reality of the extent to which U.S. consumers use their mobile devices each month. In short, the calling profile of the average U.S. consumer is nearly three times as much as the calling profile for the assumed "high use" OECD package and six times as much as the "medium" use package.
A report released in May 2009 by CTIA, the wireless industry trade association, indicates that Merrill Lynch's research shows the price per minute of service in the U.S. is the lowest of the 26 OECD countries and U.S. consumers have the highest minutes of use per month of the 26 OECD countries.
You can review both the OECD and CTIA reports, and you should do so. Aside from the pricing data, the CTIA report contains much data, fully consistent with other sources and not contested, which demonstrate the competitiveness of the U.S. wireless industry, and, concomitantly, the extent to which such competitiveness has led to a wide array of choices in applications and equipment for consumers.
Presumably, it is good that Americans, on average, use their wireless devices much more, on average, than do their counterparts in OECD countries. U.S. consumers must perceive value in doing so.
Before any policymakers begin to use the new OECD report as a pretext for regulating the highly successful U.S. wireless industry, they should understand, to borrow from Ambassador Gross, that the OECD report may be interesting, but "deeply, deeply flawed."
Thursday, May 21, 2009
More Evidence of Consumers Supporting a Deregulated Wireless Market
Some key facts contained in the CTIA ex parte:
- The United States still has the lowest cost per minute and the highest minutes of use of all 26 OECD ranked countries.
- Over 630 different handset are sold in the United States and consumers have access to over 40,000 applications sold through four newly created app stores. Three more stores and more than 20,000 additional applications are planned to launch this year.
- The United States has a higher percentage of consumers actively using mobile Internet capabilities than any other country measured. Additionally, more than half of all U.S. wireless consumers utilize a data plan on their phones and U.S. wireless web use accounts for 29.3% of all mobile web access worldwide.
Monday, April 27, 2009
The "Common Carrier" Free Press
You should read the entire piece, but the core point is this: For reasons of fairness and economic efficiency, "it is not necessarily best for consumers -- for overall consumer welfare in an economic sense -- for all subscribers to be charged the same flat rate for service, regardless of the amount of their own usage."
There is an additional point that should be made as I read some of the Free Press' post-withdrawal statements as the organization continues to press its case against consumption-based billing. Free Press risks becoming "The 'Common Carrier' Free Press" in addition to the "Free Lunch" Free Press. As I have said countless times during the past five years or so, all net neutrality-like mandates -- and, make no mistake, a prohibition on CBB is a net neutrality mandate -- in effect constitute common carrier-like regulation of broadband providers not dissimilar from the common carrier regime to which AT&T was subject in the twentieth century's monopolistic communications era.
The core elements of common carrier regulation are a non-discrimination mandate and/or some form of rate regulation. Of course, most net neutrality mandates proponents routinely claim that "prohibiting discrimination" is a chief aim. Less often do they say – at least openly – that they also advocate rate regulation. But rate regulation almost always lurks, is inherent really, in broadband restrictions sounding in net neutrality.
Free Press claims that its opposition to TWC's proposal was based on the notion that TWC's prices are too high. Thus, in its initial press release announcing it was organizing a nationwide protest, Free Press referred to TWC's allegedly "healthy broadband profit margins." In its April 16 press release issued celebrating its victory after TWC withdrew the planned trial, Free Press charged TWC with a "price gouging scheme" and "unfair price hikes."
Most recently, in an April 22, 2009 letter to Congress calling for an investigation of all CBB trials by any broadband provider, the rate regulation agenda of Free Press becomes even more apparent. Free Press first says that "no provider has disclosed useful cost information." You might think this would mean Free Press is poised to retract its days-earlier claims concerning healthy profit margins, unfair price hikes, and the like. But no. It is just an opportunity for Free Press to suggest that "the usage fees are well above the marginal cost of providing Internet service." And to suggest that the prices for Internet service "bear little or no relation to costs." And to suggest that the prices may be "arbitrarily above costs."
The point should be obvious, and you don't have to be a brain surgeon, or even a public utility lawyer or an economist, to get it: The only way we really would ever know whether a broadband provider's prices are above marginal or average costs (or any other variation of these two, and there are others), or whether rates are "fair" or "arbitrary," would be to conduct a full-blown rate case. But wait. If you have ever tried, or otherwise participated in any way in a public utility rate case, or even witnessed one, then you know that, ultimately, the determination and assignment of "costs", especially with respect to operators engaged in providing multiple products over the same network facilities, approaches the metaphysical.
Although I know the exponential growth of Internet traffic, spurred by video, poses non-frivolous network management challenges for broadband providers in light of capacity constraints, I am in no position to offer firm opinions on the "marginal" or "average" costs of TWC or other broadband providers. But I am strongly of the opinion it would be a serious mistake for policymakers or regulators to start down the road towards undertaking the nearly impossible task of trying to determine those costs, and, in effect, imposing a rate regulatory regime on broadband Internet providers. It is far preferable, given the extent of already-existing broadband competition, with the prospect of more to come, to rely on marketplace competition to protect consumers. As I said in my April 16 piece: "It would be foolish for TWC to adopt offerings, whether consumption-based pricing or otherwise, which do not meet consumers' marketplace expectations."
We don't need rate regulation of Internet broadband services, or anything roughly resembling rate regulation. What we need, instead, is for the "Free Lunch" Free Press and the "Common Carrier" Free Press to step back and consider whether all consumers won't be much better off if we don't impose a 20th Century common carrier regulatory regime on the competitive 21st Century broadband Internet marketplace.
