Another Supreme Court Knockout

All nine Justices reject an attempt to expand secondary liability

WSJ editorial. Excerpts:

"provider Cox could be held liable for “contributory” copyright infringement merely because it had knowledge that some of its users were pirating music files."

"“Ordinarily, when Congress intends to impose secondary liability, it does so expressly,” Justice Clarence Thomas writes for the Court. But Congress didn’t do so in this instance, and the Fourth Circuit’s holding “conflicted with this Court’s repeated admonition that contributory liability cannot rest only on a provider’s knowledge of infringement and insufficient action to prevent it.”"

"The provider of a service is contributorily liable for the user’s infringement only if it intended that the provided service be used for infringement"

Or "the party induced the infringement or the provided service is tailored to that infringement"

"Cox didn’t do either." 

Revisiting the T-Mobile-Sprint Merger (turned out it was pro-competitive despite the fears otherwise)

From Alex Tabarrok.

"T-Mobile’s takeover of Sprint was controversial among analysts. “If this merger is not anticompetitive,” Eleanor Fox, a trade regulation and antitrust law professor at New York University, told reporters in 2020, “it is hard to know what is.” Yale economist and antitrust scholar Fiona Scott Morton delivered her verdict on the deal in a co-authored 2021 article: “The era of aggressive price competition in wireless is over.” The authors predicted that the wireless industry, whittled down to a big three, would “nestle into a cozy triopoly.”

The prediction proved wrong. Average monthly mobile subscription fees dropped sharply. In the three years before the merger, according to government price data, mobile charges declined in real terms by about 8%. In the three years following the merger, the real price decline has been nearly 12%.

These trends were even more impressive given dramatically improving network performance. Before the merger, the top four U.S. carriers delivered data download speeds averaging about 26 megabits per second, nearly all via 3G or 4G. By early 2023, with 5G deployments spreading, Verizon and AT&T data flowed 24% to 39% faster, while T-Mobile was more than three times as fast as before. T-Mobile’s high-speed coverage had also expanded; half of its connections were via 5G by January 2023, against just 10% to 20% for its rivals.

…Further evidence that the merger of T-Mobile and Sprint was pro-competitive was seen with Verizon and AT&T share prices. From 2018 to 2023, Verizon and AT&T stock prices declined sharply, losing more than a third of their real value. The postmerger marketplace was a great victory for T-Mobile but a blow for its rivals. The cozy-cartel thesis collapsed.

That’s the excellent Tom Hazlett writing in the WSJ–useful facts to remember when thinking about the current rise of antitrust."

Unintended Consequences: GDPR Edition

By James Pethokoukis of AEI.

"The purpose of the EU’s General Data Protection Regulation—which went into effect in May 2018—is to protect personal online data in a unified way across the region. It sharply limits what companies can do with user data without explicit consent and lets people request their online data. You’ve surely seen the permission screens or “consent interfaces” as you’ve clicked from site to site.

But that’s not all the GDPR does. Of course not. It’s a sweeping privacy rule that covers a huge and diverse economic sector. There are inevitably going to be unintended consequences. And we continue to find more and more of them, which should be a caution flag for American policymakers eager to replicate GDPR-like internet regulation here in the US.

In the new NBER working paper “GDPR and the Lost Generation of Innovative Apps” (Rebecca Janßen, Reinhold Kesler, Michael E. Kummer, and Joel Waldfogel), researchers find the following after analyzing data on some 4 million apps at the Google Play Store from 2016 to 2019:

We document that GDPR induced the exit of about a third of available apps; and in the quarters following implementation, entry of new apps fell by half. We estimate a structural model of demand and entry in the app market. Comparing long-run equilibria with and without GDPR, we find that GDPR reduces consumer surplus and aggregate app usage by about a third. Whatever the privacy benefits of GDPR, they come at substantial costs in foregone innovation.

Specifically: About a third of existing apps exited the market in the year after GDPR’s implementation, while the rate of app entry fell by nearly half. The results also sync with other research finding that the “implementation of GDPR had an immediate, pronounced, and negative effect on investment.”

Of course, as the researchers add, none of this necessarily means GDPR was a mistake: “A full evaluation of GDPR requires a tallying of the potential beneficial effects on privacy, along with its various unintended consequences such as increases in market concentration, undermining revenue models for content production, and – here – reducing beneficial innovation.” Yet one wonders: If EU lawmakers had been aware of such consequences before GDPR was adopted, would their next steps have been different? One might like to think so."

New Study: US Broadband Prices Fell 42% Since 2016 (due to competition and increased investment)

By Roslyn Layton.

"BroadbandNow, an independent research organization and local broadband price comparison engine, released a study on changes in US broadband prices from 2016 to today. The study compared prices across four internet technologies (Cable, DSL, Fiber, and Fixed Wireless) in four different internet speed buckets (25-99 Mbps, 100-199 Mbps, 200-499 Mbps, and 500+ Mbps), taking the average price over three months in the first quarter of each year from 50 different providers. The study reflects landline prices from national and regional providers. It does not include cellular wireless technologies like 5G. The study observes that prices have fallen between 14-42 percent across speeds. The largest price drop, $60, was found on the highest speed tier, 500+ Mbps. The study concludes that prices reflect local competition.

Why It Matters

The data clearly demonstrate lowered price and increased competition. This contradicts the assertions of many leading media, think tanks and regulatory advocates that US broadband prices are high and that there is little to no competition. For example, studies like the Open Technology Institute’s Cost of Connectivity purport that US prices are not only high, but higher than other countries. The point of these reports is to impugn America’s broadband providers and its light-touch regulatory regime. More largely, such studies reflect a long campaign to regulate broadband heavily, including nationalization efforts to promote government-owned networks by taxing private providers. The Open Technology Institute did not return a request for comment.

The continued price drop and associated increase in broadband competition for some 5 years follows the removal of heavy-handed regulation. In 2017, the Federal Communication Commission (FCC) reversed Title II common carriage rules on broadband. This restored the light-touch regulatory regime under the Federal Trade Commission (FTC), where it resided from 1996-2015. In its decision, the FCC reasoned that market competition will deliver investment and innovation in new technology, lower prices, and competition. In addition to the clear demonstration of lowered prices across all speed tiers, BroadbandNow’s study correlates the FCC’s reasoning. The last 5 years have shown increased network investment, innovation (evidenced by different broadband technologies), and local competition (observable from searches in BroadbandNow’s pricing engine and the presence of multiple landline options).

More broadband competition coming with 5G Home solutions

Prices for landline broadband will likely continue to fall as wireless technologies like 5G are adopted. 5G is an ultra-high-speed broadband technology in which data is delivered securely through licensed radio spectrum from towers and antennas. 5G is a disruptive technology to wireline technologies like cable as it can deliver large amounts of data at high speed without the need for underground wires to the home. Already some 50 million Americans subscribe to 5G.

At least two national 5G providers promote introductory 5G Home plans at 50 percent off the monthly charge of $50 when combined with an existing mobile subscription. Verizon offers 5G Home for as low as $25 per month with no annual contract, equipment fee, or early termination charge. T-Mobile has a similar offer. AT&T offers plans at $35, $40, and $50. 5G Home broadband plans are activated with a simple plug and play internet gateway device with no need for a technician visit. The ease of 5G compared to the agony of traditional landline broadband with complicating wiring, routers, and “Cable Guy” encounters was lampooned in a recent Super Bowl commercial featuring Jim Carrey reprising one of his signature roles.

5G providers also bundle marquee content to fast-track streaming entertainment with Disney+, HBOMax, Paramount, YouTube, and Sling as well as books, video games, and sports.

While these offers are not available at all locations, rollout is moving quickly as 5G providers supplement their urban networks with Fixed Wireless Access (FWA), a powerful broadband technology which can deliver connectivity between two fixed locations up to as much as 5 miles apart or more, depending on the spectrum. In fact, landline providers have also jumped into game by extending their broadband service areas with combo 5G/FWA solutions.  The future only looks brighter when it comes to broadband competition in US."

Less regulation has led to increased broadband investment

See Broadband CapEx Investment Looking Up in 2017 by Jonathan Spalter of USTelecom. Excerpts:

"As pro-consumer policy incentives for broadband innovation and investment continue to take root, the two-year decline in private capital investment in U.S. broadband infrastructure from 2014 to 2016 appears to be in the rearview mirror, according to a preliminary USTelecom analysis of the 2017 capital expenditures of wireline, wireless, and cable broadband service providers*.

U.S. broadband companies, excluding independent competitive local providers and fiber operators**, have invested between $72 and $74 billion in network infrastructure in 2017, compared to $70.6 billion in 2016, showing at least an increase of nearly $1.5 billion.

Many factors affect these figures—from the overall health of the economy to intense and rising competition, not only among broadband providers but across the internet with the ongoing convergence of entertainment, media and communications.

But as someone who closely watches and works with the companies that are among the leading investors in our nation’s economy, it is essential that we give substantial credit where it is clearly due—restoring U.S. innovation policy to the constructive, nimble and pro-consumer framework that has guided the meteoric rise of our economy since the early days of the internet.

It is no coincidence that the broadband capex slow down coincided with the previous  FCC—in its final two years—abruptly shifting course down a sharply more regulatory path headlined by the controversial attempt to subject consumer broadband services to heavy, archaic regulations written nearly a century ago."

A Democratic commissioner at the FTC says the sky will not fall with the repeal of net neutrality

See Everybody Calm Down About Net Neutrality by Jon Leibowitz. Excerpts:

"Just as the sky did not fall when the FCC imposed its current Title II version of net neutrality in 2015, it also won’t fall if the FCC reclassifies broadband as an information service later this week—that is, if it follows through with the repeal of so-called net neutrality that has so many up in arms."

"the FCC plan would restore power to police the internet to the Federal Trade Commission."

"It protected internet users from unfair, deceptive and anticompetitive practices for the two decades before the FCC’s 2015 rule, which removed its jurisdiction.

Consider the core principles of net neutrality, which I have long supported: unfettered access of the entire (lawful) internet and transparency about broadband providers’ practices. The FTC worked on those issues for years. In 2000, it conditioned AOL’s acquisition of Time Warner on the combined company’s commitment to treat competing internet providers operating on its network fairly.

Since then, the FTC has defended the rights of municipalities to provide broadband competition and helped drive the public debate about the importance of neutrality rules, even taking action in 2014 against AT&T Mobility for allegedly slowing down the bandwidth of mobile users with “unlimited” data plans.

With its authority restored—and assuming the agency prevails in a challenge to its power pending in a federal appellate court, as is likely—the FTC can hold internet providers to their public promises to maintain an open internet. Every major broadband provider has committed not to block, throttle or unfairly discriminate against lawful content. The FCC’s plan would compel providers to give customers clear and detailed information about their practices—commitments both the FTC and state attorneys general will be able to enforce, since false public disclosures violate the law.

Further, the FTC has used its enforcement authority to bring actions against other corporate practices that harm consumers. It has already done so against many of the biggest companies operating online, including edge providers (Google, Facebook, Apple, Amazon, Microsoft and Twitter), broadband providers (Comcast, AT&T) and distributors ( Dish Network and DirecTV).

The FTC and the Justice Department can also prohibit unfair competition by enforcing the Sherman Antitrust Act—a formidable hammer against anyone who would harmfully block, throttle or prioritize traffic.

Perhaps most important, the plan to restore FTC jurisdiction is good for consumers because it puts the nation’s foremost privacy cop back on the beat after a two-year absence. The FTC brought more than 500 privacy and data-security cases against companies large and small. It used this authority against broadband providers selling sensitive personal data without permission or failing to protect customer data from hackers and cyber criminals. The Obama administration called for the FTC to be the sole federal privacy enforcement agency as part of its much-vaunted 2012 Privacy Bill of Rights."

How Title II Harms Consumers and Innovators

By Roslyn Layton & Bronwyn Howell of AEI. 

"Key Points

• The Federal Communications Commission’s (FCC) 2015 Open Internet Order follows years of advocacy to implement net neutrality rules, which appears to contravene Congress’ intention that the internet be free of regulation and the people’s will for a free market for broadband.
• The application of the Title II regulatory framework to the internet has harmed consumers and innovators.
• While proponents claim they want competition in the broadband market, the objective of Title II is to create a system of government-owned broadband networks under FCC control and to significantly reduce, if not eliminate, private-sector provision.

A long-running tech policy debate is whether the internet should be shaped by the preferences of regulators and special interests or allowed to evolve through free-market forces driven by consumers and innovators. A seemingly innocuous concept, net neutrality is not officially defined or codified in the US, but its supporters claim that the Federal Communications Commission (FCC) needs to adopt internet regulation to support it. For example, proponents declare, “Net neutrality is the basic principle that protects our free speech on the Internet. ‘Title II’ of the Communications Act is what provides the legal foundation for net neutrality.”¹ In fact, it is the First Amendment of the US Constitution that protects free speech, and the terms “net neutrality,” “blocking,” “throttling,” and “prioritization” are nowhere to be found in the aforementioned Title II.

In 2015 the FCC adopted the Open Internet Order, prohibiting specific internet traffic management techniques, including blocking, throttling, and paid prioritization, and mandating a general “internet conduct” standard.² To promulgate the ruling, the FCC invoked Title II of the Communications Act of 1934 (subsequently updated by the 1996 Telecommunications Act),³ which requires telecommunications providers to be treated as common carriers. To justify such regulatory expansion, the FCC pronounced that the internet is nothing more than an extension of the circuit-switched telephone network.⁴

The 2015 order marked a stunning reversal of long-standing bipartisan policy in a divisive 3–2 vote. Almost immediately, the order was challenged by nine lawsuits from small and large cable, wireless, and telecom providers, as well as from Daniel Berninger, the coinventor of Voice over Internet Protocol (VoIP), as the order effectively banned his online application of high-definition voice behind a platform.⁵ The DC Circuit upheld the order in court, but petitioners continue to appeal.⁶ In April 2017, the new FCC Chairman Ajit Pai launched a Notice of Proposed Rulemaking to reverse the order.⁷

Such back-and-forth on classification is counterproductive and suggests that the language from the 1996 Telecommunications Act is not clear for some and that Congress should clarify whether the FCC has the authority to regulate the internet. Section 230 of the Telecommunications Act notes that it is the policy of the United States “to preserve the vibrant and competitive free market that presently exists for the Internet and other interactive computer services, unfettered by Federal or State regulation.”⁸ Incidentally, the vast majority of countries with net neutrality rules have promulgated them through legislation because existing communications laws did not stipulate the appropriate authority within the telecom regulator, and litigation would otherwise ensue.⁹

The 2015 Open Internet rules and the imposition of Title II are problematic for several reasons,¹⁰ but put plainly, common carrier obligations are meant for natural monopolies—markets in which only one firm provides a good or service. That is not the case for broadband in the US. It would be customary for an economic regulator such as the FCC to assess first whether there was an abuse of market power and to report on it accordingly before applying regulation symmetrically across the nation’s 4,459 broadband providers,¹¹ but the FCC did not do this.

Even though wireless and wireline technologies have historically been regulated with different statutes, they received the same force of the FCC’s regulation. This might suggest that the technologies are substitutable, but the FCC dismissed that as well.¹² Moreover, the FCC did not investigate whether there was systematic abuse or consumer harm but merely suggested four potential issues: one that it resolved without rules, another that was resolved mutually by the parties’ engineers, and two that did not amount to violations.¹³ Indeed the FCC notes only one formal complaint made since 2010. (The second time the FCC tried to institute regulations on net neutrality, rules were codified but later struck down.)¹⁴ Nor did the commission perform a regulatory impact assessment or cost-benefit analysis, which is de rigueur for major shifts in regulation.

Advocates assert that Title II is necessary because the broadband market is not competitive,¹⁵ but as this paper demonstrates, Title II’s objective is not to create a competitive market—that is, a market in which multiple firms compete with different broadband technologies. The objective of Title II advocates is to create a government monopoly of broadband provision with a single technology, specifically municipally owned networks offering the uniform technology of fiber to the premises (FTTX). Title II is essential because it authorizes the FCC to regulate the day-to-day activities of broadband networks similar to Ma Bell, thereby empowering regulators to realize advocates’ utopian constructs of a “neutral network,” “open network,” or “free culture commons,”¹⁶ as if there is no bias to government-provisioned broadband.

When deconstructed, the Open Internet Order and Title II reveal the means and methods to reduce the profitability of privately owned network assets. They do this through controls on prices and data traffic and the intention to levy taxes and fees on top of existing broadband subscriptions to create funding for government-owned networks, ideally using universal service provisions. The Open Internet rules against blocking and throttling, although seemingly consumer-centric, are powerful price controls and legal tools to compel broadband providers to deliver traffic regardless of the marginal cost to networks and frequently at zero price.¹⁷ Moreover, the catchall internet conduct standard can be used to limit any attempt by a broadband provider to offer a new product or service that does not pass muster by advocates’ “open” standards, however they define them—for example, the undue scrutiny of free or zero-rated offers.¹⁸

Such regulation dampens broadband providers’ ability to compete, innovate, and deploy new infrastructure¹⁹ and endeavors to create a “dumb pipe” commoditization of broadband—that is, networks that provide pure transmission without intelligence. This is helped by Title II advocates’ proposition that financial institutions be created, which would change the incentive structure for municipal broadband investment such that private provision becomes less attractive.

This paper shows that a free market, or the free exchange between broadband providers and their customers, as well as third-party content and service providers, has been systematically disintermediated by the FCC through Open Internet regulation. Title II hurts consumers by denying them freedom of choice and forcing them to pay for content, data, and features they do not necessarily recognize or value. This paper describes how the market is shaped by regulators’ preference to focus on speed, rather than to allow consumers to select and contract for their preferred features such as flexible pricing, quality, service, safety, and durability.

This paper further describes from a historical context how innovators have been harmed by the FCC banning technologies and regulating startups. The FCC thus emerges as a textbook example of the abuse of the administrative state,²⁰ in which regulators push and exceed the bounds of their delegated authority to realize “social” and “progressive” outcomes that may be inapposite to the will of the people."

Why Net Neutrality Was Mistaken From the Beginning (AOL Edition)

It turns out that Tom Wheeler, the FCC head who imposed the rules, doesn't know what he's talking about.

By Nick Gillespie of Reason.

"Current Federal Communications Commission (FCC) Chairman Ajit Pai memorably told Reason that "net neutrality" rules were "a solution that won't work to a problem that doesn't exist."

Yet in 2015, despite a blessed lack of throttling of specific traffic streams, blocking of websites, and other feared behavior by internet service providers (ISPs) and mobile carriers, the FCC issued net neutrality rules that gave the federal government the right to punish business practices under Title II regulations designed for the old state-enabled Bell telephone monopoly.

Now that Pai, who became chairman earlier this year, has announced an FCC vote to repeal the Obama-era regulations, he is being pilloried by progressives, liberals, Democrats, and web giants ranging from Google to Netflix to Amazon to Facebook, often in the name of protecting an "open internet" that would let little companies and startups flourish like in the good old days before Google, Netflix, Amazon, and Facebook dominated everything. Even the Electronic Frontier Foundation (EFF), which back in 2009 called FCC attempts to claim jurisdiction over the internet a "Trojan Horse" for government control, is squarely against the repeal.

Yet the panic over the repeal of net neutrality is misguided for any number of reasons.
First and foremost, the repeal simply returns the internet back to pre-2015 rules where there were absolutely no systematic issues related to throttling and blocking of sites (and no, ISPs weren't to blame for Netflix quality issues in 2013). As Pai stressed in an exclusive interview with Reason last week, one major impact of net neutrality regs was a historic decline in investment in internet infrastructure, which would ultimately make things worse for all users. Why bother building out more capacity if there's a strong likelihood that the government will effectively nationalize your pipes?

Despite fears, the fact is that in the run-up to government regulation, both the average speed and number of internet connections (especially mobile) continued to climb and the percentage of Americans without "advanced telecommunications capability" dropped from 20 percent to 10 percent between 2012 and 2014, according to the FCC (see table 7 in full report). Nobody likes paying for the internet or for cell service, but the fact is that services have been getting better and options have been growing for most people.

Second, as Reason contributor Thomas W. Hazlett, a former chief economist for the FCC, writes in The New York Daily News, even FCC bureaucrats don't know what they're talking about.
Hazlett notes that in a recent debate former FCC Chairman Tom Wheeler, who implemented the 2015 net neutrality rules after explicit lobbying by President Obama, said the rise of AOL to dominance during the late 1990s proved the need for the sort of government regulation he imposed. But "AOL's foray only became possible when regulators in the 1980s peeled back 'Title II' mandates, the very regulations that Wheeler's FCC imposed on broadband providers in 2015," writes Hazlett. "AOL's experiment started small and grew huge, discovering progressively better ways to serve consumers. Wheeler's chosen example of innovation demonstrates how dangerous it is to impose one particular platform, freezing business models in place."

Deep confusion reigns on this point. In an explainer video posted earlier this year by the Wall Street Journal, net neutrality is analogized to package delivery. The overnight shipper, FedEx, delivers boxes to Amazon's customers, treating them all the same. This, says the video, is exactly what net neutrality rules applied to ISPs do.
Wrong. FedEx is unregulated. The firm chooses to offer terms and conditions that apply generically. Its rival, UPS, not so much: "UPS is not a common carrier," says the company's website, "and reserves the right in its absolute discretion to refuse carriage to any shipment tendered to it for transportation."
The firms are free to blaze different trails, with markets deciding the outcome.

Read the whole thing here.

And watch/read an interview with Hazlett from earlier this year where he discusses his epic history of the FCC, The Political Spectrum, and argues that deregulation gave us cable, HBO, and the iPhone.
Indeed, even more worrying than the decline in investment following the implementation of net neutrality is the attempt by its supporters to assume that the current moment is how internet access will forever be delivered. Last year, for instance, mobile traffic surpassed fixed (or desktop) traffic for the first time, so the territory is changing fast. Pai told Reason about a variety of moves that will allow for new ways to deliver the internet, especially to rural areas that are currently lagging behind. He also noted to Reason that many of the legal actions lobbed at mobile carriers by net neutrality proponents have been to challenge "zero-rating" plans that allow customers to stream unlimited amounts of music, video, and other services without counting against a monthly data cap. Exactly how such services are bad is unclear, especially since they don't block or throttle anything. In most contexts, giving customers something extra and unlimited is usually considered a good thing.

For Pai, repealing net neutrality isn't being done to bolster the bottom line of ISPs. Rather, it's to enable the very sort of innovation and experimentation that has worked so well from the early days of the commercialized internet. As Hazlett suggests, giving the government the ability to regulate business models is rarely a good idea, especially in fast-changing tech fields; there will be many competing models and many will die while some flourish. Pai's FCC would still insist on transparency from ISPs and the Federal Trade Commission (FTC) would be able to investigate anti-competitive practices by ISPs (Pai says that the FTC is actually better suited to this sort of role than the FCC, which is open to question). And in his interview with Reason, Pai also laid out some benchmarks by which to judge whether the repeal of net neutrality is successful or not.

Listen below, read a full transcript here, or go to iTunes and subscribe to the Reason Podcast and never miss our thrice-weekly conversations about politics, culture, and ideas from a libertarian perspective."

Denmark Proves We Don't Need the FCC

By nearly eliminating their equivalent of the Federal Communications Commission, Danes now enjoy some of the best IT and telecom services on earth

By Andrea O'Sullivan of Mercatus. Excerpts:

"Denmark in particular is praised for its stellar telecommunications services. The country has topped the International Telecommunications Union's ranking of global information and communication technology (ICT) provision for years due to its expansive broadband and wireless penetration, fast Internet speeds, and ample provider competition."

"So how did Denmark do it? Deregulation. By virtually eliminating their equivalent of the Federal Communications Commission (FCC), Danes now enjoy some of the best ICT service on the planet.

A new Mercatus Center working paper by Roslyn Layton and Joseph Kane describes precisely how Danish telecommunications officials undertook successful deregulatory reforms. It starts with Danish regulators who quickly understood the promise of digital technology and realized that government policies could quash innovative applications that would benefit consumers and businesses alike. From there, they developed a plan to prioritize competition and development instead of central control. This hands off-approach was so successful that eventually the country's National IT and Telecom Agency (NITA) was disbanded altogether."

"Policymakers clearly stated their opposition to subsidy-driven "growth" and heavy-handed regulation. The country's state-owned telecommunications provider, Tele Danmark (TDC), was completely privatized in 1998 through the efforts of Social Democrat Prime Minister Poul Nyrup Rasmussen. The next year, a consortium of Danish political parties formed a "Teleforlig," or telecommunications agreement, that outlined their goals. It stated:

It is important to ensure that regulation does not create a barrier for the possibility of new converged products… Regulation must be technologically neutral, and technology choices are to be handled by the market. The goal is to move away from sector-specific regulation toward competition-oriented regulation.

And Danish regulators kept this promise. For example, following the privatization of TDC, NITA levied special regulations on the provider so that it would not abuse its previous monopoly to prevent new competition in wireless. TDC was therefore subject to controls on its access to mobile networks and call origins. But NITA discovered that the wireless industry was sufficiently competitive by 2006, with four active providers in the market. Remarkably, NITA then dissolved the TDC regulations. As one official stated, "We are obliged to remove the regulation when the competitive situation demands it. There is no need to regulate something that market forces can take care of."

By 2011, Danish ICT provision had become so competitive and responsive to market needs that NITA closed up shop all together. Interestingly, this major deregulation was not the undertaking of a wild-eyed free market party, but rather a consortium of the center-left ruling parties. Nor did the development make much of a splash in the public eye, receiving very little public press or debate.

According to those involved with the reform, there was simply no need to operate a specialized telecommunications regulator anymore. Plus, the existence of a specialized telecommunications regulator could lend itself to regulatory capture and corruption—why invite temptation? Hence NITA was disbanded and its limited regulatory functions were transferred to the general Danish Business Authority."

"Denmark's voluntary net neutrality system sparked a revolution in mobile-app development in the country. Meanwhile, countries that chose top-down net neutrality regulation have remained stagnant."

Deregulation of the TV market has led to a golden age of television, says

See AT&T and Time Warner Merger — Media Monopoly or Marketplace Evolution? by Brent Skorup of Mercatus.

"Media acquisitions of all sizes attract public scrutiny, and this week the Senate will hold a hearing about AT&T’s pending acquisition of Time Warner, the media company that owns TV programming like CNN, HBO and TBS. The federal competition agencies, the Federal Trade Commission and the Department of Justice, are staffed with economics experts and should analyze the deal’s competitive effects. At the same time, the agencies should discount the inevitable hyperbole from advocates and competitors.

Those merger opponents have a difficult case to make. The media and communications marketplace has changed in the last 20 years. Advocates’ talking points — predicting media monopolies and stagnant markets — haven’t.

Rapidly improving technology and pro-competition federal policy have created a competitive communications marketplace and the pending merger is an attempt to anticipate consumer demands and gain a head start on swift competitors. TV viewing habits have changed rapidly and younger people in particular are watching more online video and more video on mobile devices. Piper Jaffray found that in 2016, for the first time, teens spent more time watching YouTube than cable TV.

Few people realize, however, that this revolution in consumer habits occurred because of conscious policy decisions. For decades, federal and state lawmakers encouraged phone and cable monopolies. Command-and-control fell out of favor, however — and in the 1990s, Congress reversed course and started encouraging competition in TV, phone and internet service.

At the time, satellite TV was in its infancy and cable operators faced little competition. That all changed after the 1996 Telecommunications Act. Starting in 1996, cable TV’s market share fell from 94 percent to 53 percent today. Telephone companies, which were finally allowed to offer TV, and satellite providers went from 4 million households to more than 40 million households.

Since then, TV programming and choice have virtually exploded. The number of channels received by the typical household went from around 50 channels to nearly 200. That doesn’t include online options, which Congress protected from regulation — like Netflix, Amazon and Hulu — nor the 100-plus niche online video services that launched in 2015 alone. Altogether, there are more than 400 scripted shows. This Golden Age of Television is attributable to deregulation of the TV market — content creators have far more distributors to sell to.

It’s tempting to think that phone companies are simply leveraging their old monopoly status into new markets, like TV, but that’s not really the case. While telephone companies added millions of TV and broadband customers, they saw even larger losses of their phone customers. Phone companies lost more than 100 million landline subscriptions as people switched to voice service from cable companies and wireless operators.

AT&T and other wireless carriers see what nimble internet companies like Google, Facebook and Amazon see: Consumers want quality entertainment, and they want the ability to watch it everywhere. And just as phone companies invaded the video marketplace and cable companies invaded the phone marketplace, internet companies are invading the advertising market once dominated by newspapers and broadcast TV. Google, of course, is the largest, in terms of ad revenue but analysis from The Information, the tech news publication, revealed that Facebook recently surpassed Comcast, Disney and CBS for ad dollars.

No one knows what the winning recipe is for continued profits. Ad-support or subscription? Distribution via the internet or cable companies? Mobile or landline? Live sports or scripted shows or YouTube stars? What is clear is that consumers win as firms scramble to upgrade networks, produce new content and experiment with new business models. Output is up and the old regulatory categories — cable, satellite, internet, phone — are quickly breaking down. The competitive ferment is such that some countries, like Denmark, have decided to eliminate their telecommunications agency in favor of using technology-neutral competition laws.

Lawmakers should skeptically view predictions that the communications industry is sliding toward monopoly. Congress wisely broke down competitive barriers 20 years ago, and consumers are finally seeing the benefits. Yes, U.S. competition authorities need to analyze major media deals for potential anticompetitive conduct. But data, not talking points, should determine policy."

Deregulation Spurs Variety in TV Content and Price

From Mercatus.

"It is common for tech journalists and media scholars to decry so-called cable monopolies. Few, however, acknowledge the source of competitive problems for TV and Internet service: poor government policy. For decades, city, state, and federal governments encouraged local cable TV monopolies with restrictive regulations that kept competition out. Despite that, there is now an abundance of content in television programming for subscribers, as policies have changed and competition has increased. Today, TV distributors like phone companies (telcos), cable companies, and satellite companies spend billions annually to purchase content and improve their networks. Pay TV or “multichannel video programming distributor” (MVPD) are the regulators’ terms for what most consumers call cable or satellite television.

The chart uses Federal Communications Commission data for the years 1994 to 2003 and industry data from 2004 to 2014 to show market share of the three major types of MVPDs—cable TV, satellite TV, and telco TV. Satellite TV providers like Dish Network and DirecTV have slowly eroded cable market share since the early 1990s and now possess over one-third of pay TV subscribers. Telephone companies in the mid-2000s began to upgrade their phone networks to support TV viewing and now, a decade later, serve over 13 percent of TV subscribers. Market share of cable companies has declined to 53 percent today from over 95 percent in the mid-1990s as consumers choose to switch to cable’s competitors.

For decades, regulators believed that pay TV was a natural monopoly. Therefore, cities across the country gave exclusive construction contracts to cable TV companies in order to ensure networks were built and to extract favors like public access channels. Further, Congress largely prohibited telephone companies from providing TV service even though phone companies had already wired most US homes for voice service. In the 1990s, satellite TV started attracting large numbers of TV subscribers owing to a combination of deregulatory satellite policy and improvements in technology. Theories of natural monopoly fell away and in 1996 Congress finally permitted phone companies to provide TV. Telco TV did not gain measurable market share until the mid-2000s, however, when the FCC freed telephone companies from regulations like “unbundling” rules that forced phone companies to sell their lines to competitors at regulated rates. In the investment-friendly regulatory environment after deregulation, telcos upgraded their networks and began to offer TV. Verizon’s FiOS, AT&T’s U-verse, and CenturyLink’s Prism TV are all examples. Today, consumers benefit from an increasingly competitive TV (and Internet) marketplace, both in variety of content and in competition over price.

"

FCC's Cable Box Mandate: Costly, Illegal, and Unnecessary

By Ryan Radia of CEI.

"Regulators at the Federal Communications Commission (FCC) want to dictate how cable and satellite television providers design their so-called “set-top boxes”—a fancy term for what many people refer to as a DVR or HD box that they rent from their television provider. The FCC claims its proposed rules would “unlock” the box, enabling consumers to watch live television on all sorts of devices—from smartphones to gaming consoles—instead of paying $10 to rent a dedicated set-top box.

But there’s a big problem with this proposal: it’s costly, unnecessary, and outside the scope of the agency’s authority. This won’t come as a surprise if you follow the FCC, which has recently embarked on numerous ill-conceived regulatory voyages from micromanaging Internet service providers to stripping elected state legislatures of the authority to pass laws protecting taxpayers from municipal boondoggles. In the same vein, the FCC’s new effort to regulate set-top boxes will only hurt consumers and delay innovation.

The FCC’s foray into set-top boxes is especially bizarre given that these boxes are quickly going out of style. Comcast and Time Warner Cable, two of the nation’s largest cable companies, have announced that renting a cable box will soon be optional for their subscribers, who will be able to watch and record television on devices including Roku media players and newer “smart” television sets.

Meanwhile, Internet-based services like Dish Network’s Sling TV and Hulu’s forthcoming cable-killer stream live television to practically any device, while on-demand platforms like Netflix, Amazon Prime, and HBO NOW offer massive libraries of movies and television shows, including lots of original content.

To read more about why regulating set-top boxes is an unwise idea, check out the comments that CEI recently filed with the FCC along with TechFreedom. We explain why Congress never authorized the agency to impose such far-reaching rules on cable and satellite providers. We discuss how the rules would undermine copyright laws, stripping the owners of television shows of the right to enforce the terms of their licensing agreements with television providers. And we told the FCC that if it insists on issuing new rules, it should consider a far less costly and dubious option, known as the “Apps-Based Proposal,” which would not require television providers to re-architect their systems."

Understanding the economics of cable mergers

By Daniel Lyons of AEI.

"It is often said that the definition of insanity is doing the same thing twice and expecting a different result the second time. A scant three months after regulators torpedoed Time Warner Cable’s proposed merger with Comcast, the company found a new suitor, as part of a blockbuster three-company merger with rivals Charter and Bright House. But unlike its predecessor, this mega-merger among three of America’s six largest cable providers is likely to receive the government’s approval. The reasons why one proposed cable behemoth was bad, but another is good, is not obvious, and has little to do with the traditional story about preventing cable monopolies.

Many assume that the government opposed Comcast’s bid because combining the country’s two largest cable companies would have reduced cable competition. But this is false. Because of industry economics and bad government policy, cable companies’ service areas rarely overlap. Comcast and Time Warner do not compete head-to-head in any market, and neither do the three companies in the Charter deal. So mergers will not reduce the cable options available to any customer.

Similarly, some suggest regulators will approve the Charter deal because the resulting company could better compete against Comcast.  This is also false, as post-merger Charter will not compete with Comcast for customers. Understanding these deals, and the regulatory response to them, requires a more nuanced understanding of cable markets.

As in 2014, the economics of the cable industry are ripe for consolidation. Cable companies lost roughly one million customers in 2014. Most blame high prices, although cable companies have little control over price increases. Bloomberg reports that over half of your cable bill goes to content providers such as Viacom and Disney. While cable bills have risen 5% each year, these programming costs have risen 10% each year, creating an increasingly difficult margin squeeze for cable providers. Mergers create scale, giving cable companies more leverage against studios in the battle to divide profits in a shrinking cable market. The quest for scale is driving merger mania throughout the industry, including the aborted Comcast-Time Warner deal and Charter’s proposed mega-merger.

But mergers give these companies greater scale in another industry as well: broadband Internet service. America’s cable companies are also its largest Internet providers. Many assume this drove the government’s concern about the Comcast deal. Cable is under increasing pressure from Internet-based video providers such as Netflix and Hulu. But those companies rely upon broadband networks to reach consumers. The combined Comcast-Time Warner empire would have controlled roughly half of all American broadband customers—and regulators were afraid the company might use its power over broadband networks to protect its cable business from Internet-based competition.

This concern was probably overstated. Antitrust law generally forbids such abuses. Moreover, most cable companies understand that the Internet is their vehicle for future growth. A rob-Peter-to-pay-Paul strategy cannibalizing the future to prop up a dying cable business would be bad business in the long run.

Nonetheless, this concern explains why Charter will likely face less regulatory scrutiny. Charter, Time Warner, and Bright House together comprise only one-third of American broadband customers, so they will have less opportunity for anticompetitive behavior. Moreover, the Federal Communications Commission’s new net neutrality rules give regulators more oversight of broadband networks and greater ability to halt anticompetitive practices.

Ultimately, cable’s merger mania reveals its identity as a mature industry in transition. The Internet has a history of disrupting seemingly stable old businesses, as companies such as Borders, Blockbuster, and countless music labels can attest. Now the Internet has cable in its sights. Greater scale will help this suddenly old media compete more effectively in an increasingly rich, dynamic, and competitive market for video. And in the process it will free up capital to improve Internet speeds and build out the broadband networks that will power the industry’s future."

A merged Comcast and TWC still has plenty of competition

See The Bigger Cable Guys, WSJ, 2-14-14. Excerpts:

"He's right, but unlike the markets for beer, air travel and wireless, cable companies don't compete with each other. They have local franchises and compete against telephone, wireless and satellite companies. So there's no market overlap between systems owned by Comcast and those of Time Warner Cable. Comcast, which is dominant in Philadelphia, will get millions of new customers in New York and Los Angeles. But how can dominance in one geographic region give Comcast new pricing power in a different area?

For both firms, the competition in broadband Internet connections comes from firms like AT&T T -1.02% and Verizon. VZ -1.69% In video programming the cable guys compete with those same firms, plus Dish Network, DISH -2.43% DirecTV, DTV -0.11% Netflix, NFLX -0.24% Google's GOOG +0.24% YouTube and various other online ventures seeking to provide video. In this arena cable operators, regardless of size, are hardly dominant. Comcast CEO Brian Roberts said on a call with reporters Thursday that every single cable operator has lost video customers over the last 10 years.

Another fear is that owning more cable pipes would give the combined firm more leverage in negotiations with the producers of TV and other content. But CBS, CBS +0.54% Disney DIS +1.71% and our former corporate cousins at Fox are big enough to take care of themselves. In any case Mr. Roberts has already promised to divest some three million cable subscribers, so the combined Comcast-TWC would still have 30 million subscribers or less than 30% of the cable market nationwide, about the same share it had a decade ago."

"The larger reality is that technology is disrupting the cable industry as it is so much else. Mr. Roberts says the merger will help consumers get higher broadband speeds and faster in-home Wi-Fi, and maybe he's right. But Comcast hasn't been the most nimble of competitors in innovating across the Internet, and in two or more years it could be outmaneuvered in the marketplace."