Network Neutrality and Industry Structure

Abstract

One of the most heated debates in the current efforts to re-write the Communications Act has been whether the federal government should impose "Network Neutrality" requirements on broadband service providers. While we argue neither for nor against the need for Network Neutrality legislation in this POLICY PAPER, our analysis shows that policymakers should avoid Network Neutrality mandates that have the intent or effect of "commoditizing" broadband access services since such a policy approach is likely to deter facilities-based competition, reduce the expansion and deployment of advanced communications networks, and increase prices. Given the economic characteristics of local communications networks, policies that promote commoditization of broadband access could lead to the monopoly provision of advanced broadband services in many markets. This outcome would harm consumers substantially.

Keywords: Network Neutrality, Commoditization, Entry, Broadband

JEL Classification: K23, K29, L96, L98, L99, O33, O38