Innovations in Mobile Broadband Pricing

Abstract

The FCC’s net neutrality rules sought to limit interference by broadband service providers in markets for Internet-based content and applications. But to do so, the Commission significantly reduced the amount of innovation possible in the broadband service market. Within limits, broadband providers may offer different plans that vary the quantity of service available to customers, as well as the quality of that service. But they generally cannot vary the service itself: with limited exceptions, broadband providers must offer customers access to all lawful Internet traffic, or none at all.

This Article explores the way in which this all-or-nothing homogenization of the American broadband product differs from innovative experiments taking place in other countries. In various parts of the world, customers are offered several alternatives to the unlimited Internet model, including social media plans, feature phone partnerships, bundled apps, and free premium content. It also examines the positive role that vertical agreements may play when promoting innovation and competition within a market.

Undoubtedly, the FCC can and should intervene to stop anticompetitive practices, including anticompetitive vertical foreclosure. But these determinations should be made on a case-by-case basis based on proof of market power and consumer harm. This approach would allow wireless providers to experiment with new and different Internet business models without risking an unnecessary regulatory response.

Keywords: net neutrality, broadband, innovation, facebook, google, FCC, pricing

JEL Classification: L42, L96