FTC Issues Staff Report on Broadband Connectivity Competition Policy

I blogged on Nov. 22nd, 2006, about an interview I had with the FTC Internet Task Force some time ago.
Well, today the Federal Trade Commission’s Internet Access Task Force issued a report, “Broadband Connectivity Competition Policy (PDF),” which summarizes the Task Force’s findings in the area of broadband Internet connectivity and, in particular, so-called network neutrality regulation. Based on these findings, and FTC staff’s experience with the operation of myriad markets throughout the economy, the report identifies guiding principles that policy makers should consider in evaluating proposed regulations or legislation relating to broadband Internet access and network neutrality.

According to Chairman Deborah Platt Majoras, “This report recommends that policy makers proceed with caution in the evolving, dynamic industry of broadband Internet access, which generally is moving toward more – not less – competition. In the absence of significant market failure or demonstrated consumer harm, policy makers should be particularly hesitant to enact new regulation in this area.”

As the report notes, certain conduct and business arrangements that broadband providers may pursue, including data prioritization, exclusive deals, and vertical integration into online content and applications, can benefit consumers. “The primary reason for caution is simply that we do not know what the net effects of potential conduct by broadband providers will be on all consumers, including, among other things, the prices that consumers may pay for Internet access, the quality of Internet access and other services that will be offered, and the choices of content and applications that may be available to consumers in the marketplace.”

Noting that three federal agencies – the Federal Communications Commission, the Department of Justice, and the FTC – have jurisdiction to address broadband Internet access, the report explains that the FTC, for its part, will continue to devote substantial resources to maintaining competition and protecting consumers in the broadband area. In addition to vigorously enforcing the antitrust and consumer protection laws, the FTC will expend considerable efforts on consumer education, industry guidance, and competition advocacy in the area of broadband Internet access.

In addition to proposing guiding principles for policy makers, the report includes background information on the technical functioning of the Internet and the legal and regulatory developments that have led to the current debate over network neutrality regulation; provides an overview of the arguments for and against such regulation; analyzes the consumer welfare effects of certain potential conduct by broadband providers, including data discrimination and prioritization; explores the application of the antitrust and consumer protection laws to such conduct; and identifies various proposals for broadband Internet access that have been put forth to date.

The report is the second publicly released work from the Task Force, which was convened by Chairman Majoras in August 2006 and is headed by Maureen K. Ohlhausen, Director of the FTC’s Office of Policy Planning. With members from throughout the agency, the Task Force seeks to enhance the FTC’s expertise in the increasingly important area of Internet access.

The Commission vote to approve the report was 5-0, with Commissioner Jon Leibowitz issuing a separate concurring statement. In his statement, Commissioner Leibowitz said, “The Report also soberly reminds us that regulation often has unintended side-effects. That is surely true. But it seems to me equally clear that this Report shows that doing nothing may have its costs as well.”

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