Public utility regulation of broadband: Lessons from the electricity industry

[Commentary] The takeaway is that the public utility model sometimes works well to discipline natural monopolies in stodgy, unchanging fields such as water, where regulation is needed to displace dysfunctional market forces. In dynamic, competitive industries such as telecommunications, public utility regulation is not only misplaced but also affirmatively harmful to consumers. It is rigid and inflexible, precluding industry players from responding to new technological developments in ways that help consumers.

Perhaps more problematically, the public utility model allows politics to replace economics as the primary driver of decision-making, market development, and capital allocation. And this too often permits the process to be captured by incumbents that then insulate themselves from competition — something the electricity industry and old telecommunications hands, know all too well.

[Daniel Lyons is an associate professor at Boston College Law School]