Monday, February 25, 2008

Network Neutrality Unneeded in a Competitive Broadband Marketplace

In the Feb 25th edition of the Wall Street Journal former hedge fund manager Andy Kessler strongly suggests that competition would solve any calamity that network neutrality rules would (hamhandedly) attempt to remedy. See
Mr. Kessler suggests the need for legislation to promote broadband competition, a Bandwidth Competition Act of 2008. Regretably, he offers few specific recommendations.
I heartily agree that in a perfect world facilities-based competition would enable consumers to “vote with their dollars” and punish any ISP foolish enough to handicap, delay, drop or otherwise meddle with their traffic. If I had a number of competitors from which to choose perhaps I could find a rate plans that provides a better fit than the current “one size fits all” model that motivates Comcast and other ISPs to rein in heavy users.
If only we had such competition. If only we had a legislature that would pay enough attention to the problem to direct the FCC and a Federal-State Joint Board to revamp efforts to jump start broadband deployment through a variety of strategies, including financial cross-subsidies.
Sponsored researchers will tell you that sufficient competition already exists thereby obviating both the need for network neutrality rules and legislation, unless of course the legislation steers money their clients’ way. According to the FCC’s latest statistics my rural zip code now has 11 broadband options, up from 9 last time. Accepting this number for the sake of discussion I still can conclude that robust facilities-based competition does not exist in my neck of the woods. Put another way access to $100 a month satellite semi-broadband and $60 a month cable broadband will not jump start broadband adoption. Nor will it create the critical mass we both agree would—if it existed—that would provide consumers and suppliers to come to terms on price and quality of service tiers.
Legislators and the FCC have to consider network neutrality rules in the absence of competition and diverging price points for broadband access.


Randy said...

I am not sure of what to make of this. When I look at the FCC's latest chart of broadband competition, I am surprised by the extent of competition that they find (such as your 11 providers available in the Penn State area). Do you not find those numbers credible and hence that is why you think that there is insufficient competition? Or, put differently, how much competition would you need to have before you decided that net neutrality wasn't an important consideration?

Rob Frieden said...

Hello Randy:

Thanks for your question and comment. I think a single locality needs several facilities-based broadband operators that actually compete on price and service. When the FCC uses a zip code measure one can't be sure how much actual choice exists within the zip code. I don't have DSL access, so cable modem service is the only option that offers true broadband for less than $75 a month.
It would only take 3-5 operators in a single locality to offer real choice. My locality has 4 airlines, but with rare exception that do not compete on price even though they do in bigger cities.

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