Economics, Regulation

An Internet for the people: Reducing cronyism in broadband

Image Credit: FreeDigitalPhotos.net

Image Credit: FreeDigitalPhotos.net

In a new paper in the AEI Economic Studies series, visiting fellow Jeffrey Eisenach argues that broadband internet providers are operating under a regulatory policy that does little to help consumers and much to stifle innovation:

Broadband is treated differently from other IT industries when it comes to competition policy: Competition in the rest of the IT sector is subject to scrutiny under the antitrust laws, while broadband is regulated by the Federal Communications Commission (FCC)…. In short, while other elements of the “Internet ecosystem” – i.e., applications, content and devices – receive ex post treatment under the antitrust laws, broadband ISPs are subject to ex ante regulation.

To solve this, Eisenach argues for replacing onerous regulation with anti-trust enforcement designed to make the broadband market more dynamic and competitive.

Unfortunately, too frequently regulation passed in the name of helping consumers results in regulatory capture and does more to benefit incumbent market participants than anything else. This kind of rent seeking and cronyism is pervasive in industries with a few established firms who use regulation as a means of keeping out competitors.

There’s no silver bullet to fix this problem, but Jeff’s suggestion of replacing regulations that prevent the broadband industry from offering faster speeds at lower prices to more customers with one that seeks merely to ensure that monopolies don’t develop strikes me as imminently sensible.

Competitive broadband markets, as with most markets, are good for American consumers and good for innovation. Anything we can do to sweep aside regulations that benefit cronies is a step in the right direction.

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