Here’s the case for stricter regulation of broadband incumbents

September 16, 2013

Harold Feld of Public Knowledge  (Photo by Doc Searls)

The American Enterprise Institute's new tech policy shop launches Monday, and over the weekend we published the first interview with the center's director, Jeffrey Eisenach. Eisenach criticized Public Knowledge's Harold Feld, who advocates stricter government regulation of incumbent broadband providers like Comcast.

I called Feld on Monday morning to get his thoughts on Eisenach's arguments. The transcript has been edited for length and clarity.

Eisenach points to satellite Internet provider Viasat as evidence that the broadband market is competitive. Do you buy that?

It has really severe bandwidth caps, so you can't do things like significant streaming media. Which means that if you're trying to run a business and have video conference calls you can't do it.

The market is constantly changing. Satellite is a lot better than it used to be. The question is if you're reliant on that because you're in a rural area, does it do a good enough job for the things you care about? The ability to run a business, the ability to do educational opportunities. At least today, satellite is still fairly expensive, it still does not do a lot of the critical things that we would want a broadband connection to do in terms of my ability to participate in society using that as my sole broadband connection. So, right now it's not doing the job.

It might change. We can fight about whether LTE is good enough, for example. LTE on a smartphone doesn't seem to do what a laptop does. In two years, if it's tablets and a mix of WiFi and LTE, maybe it will improve.

Doesn't that support Eisenach's argument, though? Wouldn't he say that we don't know which broadband technologies will work in the long run, so we need to let companies experiment?

The question isn't market power or competition. The question is what are our needs and goals and are we meeting them? You have things where competition is not going to solve your problem. I can have a wildly competitive market and still worry about consumer protection. Or there might be national concerns I have with regard to overall national policy.

For example, say I want to protect myself in terms of privacy, but I have to contact my friend Fred at his ISP. Their ISP says we can snoop on everything, and Fred has chosen that ISP because it's cheaper. I have no idea Fred's ISP says they can scan everything that comes in. If I knew that I might not correspond with Fred. But there's no way I can know that. If we don't set some minimum level of privacy that applies throughout the system, there's no way I as a consumer can protect myself.

You also have issues where things are not discoverable to the consumer. There's a lot of literature now that points to the limits of competition, the limits of rational action, things like consumer fatigue, where just as a consumer it's impossible to tell what's going on. You tend to get action by Internet vigilante mob.

Net neutrality rules give me a process by which if I think a provider is discriminating against me, the provider and I talk it out, we come to a solution, the agency will investigate and adjudicate. Without that rule, whenever I think there's a problem with an ISP blocking or discriminating, I have to start raising hell. Consumers everywhere, we'll boycott this ISP. Everything becomes a vigilante justice issue. We like the administration of justice. It's the same thing economically. We like nice orderly rules.

I understand your argument that competition won't solve every problem, but do you buy Eisenach's claim that there's sufficient competition in the broadband market?

I think it's hard to say. There are clearly a lot of markets, especially in rural areas, where there just isn't a business case for multiple providers. These markets are not inconsequential. There are other issues with regard to switching costs and information asymmetry, it's not clear how much of an impact that will have.

I always say "enough competition for what?" It depends on for what purpose. Is there enough competition to have some form of impact on the market? I'd say for wireless, sure. Obviously there's some competition on that market that is having an impact. In broadband, I see a lot less dynamic change. The way providers are differentiating from each other in terms of price and service is not nearly as dynamic.

Either there's not competition there, there's sufficient lock-in issues or other issues that there isn't a lot of need to bury the packages. There's nothing like the equivalent of the Sprint Unlimited vs. T-Mobile's no-contract plans vs. Verizon's share your devices plan. One does not see that kind of differentiation in the wireline world. If it's not happening, you've got to explain why.

I find it difficult to believe that Comcast has found the perfect model by chance. The fact that Google Fiber in the limited places where it's deployed is offering different packages would seem to indicate that there is a competition problem is those other places.

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