//  11/30/17  //  Commentary

In an earlier post, I explained that vertically-integrated broadband carriers can harm competition by excluding competitors to affiliated services from their platform (or from certain platform features). This may be especially true where these adjacent industries are characterized by significant first-mover advantages and large network effects. This means that ex post enforcement is often too little and, perhaps more importantly, too late. But I am sometimes asked whether these potential harms to competition are outweighed by the efficiency gains from the vertical integration.

The short answer is that it’s hard to tell. Scholars have debated the question, in general terms, without reaching a clear conclusion. Related economic models and studies say different things. Maybe it’s worth stomaching some exclusion to enjoy these gains. But maybe these gains aren’t really all that large, and the harm to competition is quite high. (Both the Obama and the Trump Administrations signaled their belief that the latter view is the better view.)

If these models can’t offer a straightforward answer, maybe a better approach is a simple error cost calculation.

If we don’t have net neutrality protections, then the risk is that phone companies will block competing voice services, cable companies will undermine threats to their video distribution businesses, and so on. That risk is credible: As I noted in my previous post, carriers have attempted to do precisely that.

If we do have net neutrality protections, then a risk is that we may lose some innovation though vertical integration that, say, optimizes an affiliated application for the platform (and vice versa). Is that risk credible? It is certainly possible. But carriers have also publicly disclaimed any interest in breaching the protections of the net neutrality rules—suggesting, perhaps, that the carriers don’t see much potential for innovation by doing so. Moreover, the FCC relies on the carriers’ representations in its draft order.

The cost of erroneously repealing the net neutrality rules is harm to competition along the lines of previous examples of exclusion. The cost of erroneously keeping the rules is, given carriers’ promises not to break them anyways, essentially nothing. Hence, under this calculus, the case for net neutrality comes down a pithy adage: Trust [that carriers won’t violate net neutrality principles], but verify [compliance through enforceable rules].


Congressional Oversight in the Midst of Coronavirus

3/6/20  //  Commentary

Congress has historically exercised its broad oversight authority to investigate public health crises and the executive branch’s responses to them, and it can do the same here.

Brianne J. Gorod

Constitutional Accountability Center

How Does The House Decide To Sue?

1/3/20  //  In-Depth Analysis

Since 2015, lawsuits by the House of Representatives have been authorized not by a vote of the full House but by majority of a standing, 5-member committee. Is this structure constitutional?

Madness into Dissent

12/17/19  //  Commentary

Democratic dissents are the last good thing coming from Trump’s NLRB. Now they’ll disappear.

Charlotte Garden

Seattle University School of Law