Regulation and Net Neutrality

Abstract

This paper seeks to inform the network neutrality debate by looking at the role existing government regulation has played in shaping the market for broadband access. Prior research has concluded that network externalities that exist in the market for broadband services justify government intervention (Economides and Tag, 2012). This literature takes limited competition among broadband providers as given rather than questioning why competition is limited in the first place. I argue here that limited competition among broadband providers is not the result of a market failure but rather stems from barriers to entry erected by government regulation, notably municipal “rights-of-way.” The key to improving consumer welfare is therefore not to impose additional regulations on broadband providers, but to clear the way for capital investments in the expansion of new infrastructure and the improvement of existing infrastructure by removing existing regulatory barriers to entry. I conclude that deregulation rather than more regulation would improve Internet access and result in a more level playing field for all content providers.

Keywords: Regulation, Market Structure, Net Neutrality

JEL Classification: L43, L90, L14