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Resolving Policy Chaos in High Speed Internet Access

51 Pages Posted: 24 May 2002  

Roger G. Noll

Stanford University - Department of Economics

Date Written: May 2002

Abstract

Public policy for high-speed internet access is in chaos. The nation's primary regulator of the communications sector, the Federal Communications Commission, has pursued "asymmetric regulation" (that is, different rules) for the technologies that can provide some form of high-speed internet access (telephony, cable television, wireless data networks, and satellite distribution systems). Three federal courts (two circuit courts of appeals and one district court) have issued contradictory decisions regarding whether cable modem access can be regulated and, if so, by whom. Two federal regulatory agencies, the Federal Communications Commission and the Federal Trade Commission, have adopted mutually inconsistent policies regarding cable modem access, each in the context of approving a merger. Numerous local franchising authorities have reached mutually vastly different conclusions about whether they can and should impose equal access requirements on cable modem access.

Much has been written about whether high-speed internet access should be regulated, and if so, what those regulations should be and which bodies - whether franchising entities, utility regulators, or antitrust authorities, and whether local, state or federal government - should have front-line responsibility for making the rules. With few exceptions, these analyses are adversarial documents written by individuals who work as consultants for parties that have a major financial stake in this issue. And even the few exceptions usually are defenses of a particular policy position. Although many, if not most, of these arguments are logically correct, they tend to be partial and incomplete.

The purpose of this essay is to step back from this adversarial debate for the purpose of describing the issues on which access policy should turn, and to provide a guide to policy makers about how to sort out the adversarial arguments. The foundation for this essay is the idea that decision theory provides useful framework for thinking about regulatory policy in this domain. Specifically, each regulator is one player in a sequential game with incomplete information that involves other regulators, the courts, state and federal legislatures, the firms in the industry, customers of internet services, and nature. Nature's role is periodically to deliver random technology shocks that disrupt the relative costs and performance characteristics of communications technologies and the competitive positions of the firms that supply access, navigating and operating services, and end-use services.

The structure of the essay is as follows. Section I reviews the current state of policy chaos, the policy choices to be made, and the arguments for and against these choices. Section II reviews the debate about high-speed access policy using the analytical framework of antitrust policy. Section III explores the relationship between the timing of decisions and the net benefits of a decision to impose an equal access requirement. Section IV provides a brief conclusion.

Suggested Citation

Noll, Roger G., Resolving Policy Chaos in High Speed Internet Access (May 2002). Stanford Law and Economics Olin Working Paper No. 239; SIEPR Discussion Paper No. 01-13. Available at SSRN: https://ssrn.com/abstract=311900 or http://dx.doi.org/10.2139/ssrn.311900

Roger G. Noll (Contact Author)

Stanford University - Department of Economics ( email )

Landau Economics Building
579 Serra Mall
Stanford, CA 94305-6072
United States
650-723-2297 (Phone)
650-725-5702 (Fax)

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