Defining broadband competition

[Commentary] “Competition” is a somewhat slippery word that can mean different things to different people. The Federal Communications Commission has a checkered history of using regulations and subsidies in largely unsuccessful efforts to manufacture competition. So many in the telecommunications industry have been cautiously optimistic about FCC Chairman Tom Wheeler’s rhetoric, while waiting to hear just how he defines the term. In a speech at Ohio State University, Chairman Wheeler began providing some promising details.

In his prepared remarks, the Chairman took a middle road. While noting that “[t]he Internet is not a law-free zone” and that “markets…don’t always, by themselves, solve every problem,” he explained that America “strongly favors Internet freedom, limiting government involvement to over-riding purposes” and that any intervention should be “in a fact-based, data-driven manner” to promote competition. But it was his unscripted remarks that commentators fixed upon because he noted with seeming approval the fact that some providers are beginning to offer consumers different options at different price points. But he then went a step further, seeming to endorse paid prioritization agreements as well.

Chairman Wheeler’s comments suggest that he defines “competition” to include competition among different pricing structures and business models. Consumers ultimately benefit from efforts by broadband providers, and Internet content providers, to find new and potentially more efficient ways to serve consumers. Companies with popular pricing structures will attract consumers. Bad pricing models will wither on the vine as NetZero did. Regulators should resist pressure to disrupt this virtuous cycle and pick winners and losers. Rather, they should intervene primarily when companies abuse market power in ways that harm consumers. Overall, consumers benefit from companies’ experiments to find new and more efficient pricing structures to govern an increasingly diverse marketplace.