The problem with regulating price

[Commentary] Price sets the right incentive for both supply and demand.

In the Netflix example, price encourages demand for efficient broadband products and, in turn, encourages Netflix to supply a trim and lean broadband product. Price not only helps companies determine what to supply (for example, streaming video), it helps prioritize the many qualities of that supply (for example, ease of streaming over low-bandwidth connections). The end result is a more efficient and sustainable allocation of broadband resources. Experimentation with supply prices is not unusual.

But free-market pricing alternatives in broadband markets, such as data caps, paid prioritization, and zero-rate pricing, have always been problematic for professional advocates of net neutrality. These advocates prefer that regulators approve or prohibit certain pricing models. This is a mistake. When we interrupt demand signals by fiat, we invariably must speak of the “unintended consequences” of government action.

[Boliek is an associate professor of law at Pepperdine University School of Law]