The FTC has released a report on Broadband Connectivity Competition Policy which addresses the issue of net neutrality and the FTC’s views on whether government should intervene in the issue.
Having the FTC examine the issue is interesting in itself. In some ways, people have suggested that carriers can do what they like with certain communications services, but if they call it “Internet”, then there are certain neutrality characteristics that should apply. In its statement accompanying the release of the report, FTC Chair Deborah Platt Majoras says
This report recommends that policy makers proceed with caution in the evolving, dynamic industry of broadband Internet access, which generally is moving toward more – not less – competition. In the absence of significant market failure or demonstrated consumer harm, policy makers should be particularly hesitant to enact new regulation in this area.
Almost echoing statements made by Canadian Competition Bureau chief Sheridan Scott at The 2007 Canadian Telecom Summit, the report says
The FTC’s statutory mission is to protect competition and consumers by safeguarding and encouraging the proper operation of the free market. … In evaluating whether new proscriptions are necessary, we advise proceeding with caution before enacting broad, ex ante restrictions in an unsettled, dynamic environment.
The FTC also advocates the ‘free markets’ approach favoured by Canadian Industry Minister Maxime Bernier. The report says:
Over time, competition produces the best results for consumers, providing them the lowest prices, the highest-quality products and services, and the most choices. Competition forces firms to lower their costs and prices and to improve quality, service, convenience, and other attributes that consumers value. Competition induces firms to produce the types and amounts of goods and services desired by consumers. Our freemarket system fosters innovation, creativity, and entrepreneurship that are unmatched around the world.
Similar to the situation in Canada, many claim that the broadband access market is a cozy duopoly between the telcos and cablecos. The FTC study disputes this:
While there is disagreement over the competitiveness of the broadband Internet access industry, there is evidence that it is moving in the right direction. Specifically, there is evidence at least on a national scale that:
- consumer demand for broadband is growing quickly;
- access speeds are increasing;
- prices (particularly speed-adjusted or quality-adjusted prices) are falling; and
- new entrants, deploying Wi-Fi, WiMAX, and other broadband technologies, are poised to challenge the incumbent cable and telephone companies.
Although this is merely a high-level snapshot of a dynamic, evolving marketplace, such evidence challenges the claims by many proponents of network neutrality regulation that the broadband Internet access market is a cable telephone duopoly that will exist for the foreseeable future and that the two primary broadband platforms do not compete meaningfully.
As I have written before, the FTC report notes that regulation, however well-intended, has associated costs, and may lead to unintended consequences, especially where the conduct for which regulation is intended has generally not yet occurred.