Distorting the Snallygaster Market

[Commentary] If you’ve been paying any attention at all to the Federal Communications Commission’s recent privacy rulemaking, you’ve probably heard its opponents claim that any regulation (no matter how minor, apparently) will create “distortions in the market” that would put broadband Internet service providers (or BIASes) at a disadvantage. What market is that, you ask? Yeah, we’re not sure either.

Much of the “market distortion” angle seems to come from one of two different places. First, commentators who advance the distortion argument want to treat the entire internet ecosystem as one massive, unified market, in which any player--no matter their role, apparently--can be substituted for another. A BIAS is no different, they say, from Google or Facebook or Netflix or any other number of edge providers or services. The end result is a market cryptid, a mythical beast akin (both figuratively and geographically) to DC’s fabled Snallygaster. And while the vaunted snallygaster sported the head of a lizard, wings of a bird, and tentacles of an octopus, the Internet Eco-Monster appears to have the body of an Internet Service Provider, the head of an advertising company, the arms of a search engine, and the legal rights of an individual. And while we here at Public Knowledge have debunked this myth elsewhere, it bears repeating: BIASes are unique. They are gatekeepers. Whatever other business a BIAS wants to enter, if it provides broadband Internet access, it’s a BIAS, and its BIAS-ing is subject to the same laws and regulations as its peers in that realm.

The second source of the “market distortion” argument comes from the idea that a BIAS, if banned from leveraging its dominant position in Internet access provision, would be unfairly edged out of the advertising markets vis-a-vis Google, Facebook, AOL, and the like. Again, this relies on the idea that companies are not only able, but entitled to abuse their market power in search of vertical dominance in other markets--an idea that the FCC (not to mention the courts, and Congress) have flatly rejected in previous CPNI privacy proceedings. Lest we forget, part of the impetus behind the creation of privacy rules in 1996 was AT&T’s abuse of its market power to squeeze competition in a separate market--home alarm systems.