Paid Prioritization and Zero Rating: Why Antitrust Cannot Reach the Part of Net Neutrality Everyone Is Concerned About


Author: Hal Singer
Coverage Type: analysis
Location:
Economists Incorporated, 2121 K Street, NW, Washington, DC, 20037, United States

As Internet-based distributors move up and down the stack to become vertically integrated platforms with a preferred suite of affiliated content, there is a growing concern among policymakers that innovation among independent content creators and websites may be threatened. More fundamentally, the Internet is not one thing—it is many things, and our current regulatory regimes are struggling to address that complexity. These new platforms give rise to potential conflicts of interest, in which it might pay for a vertically-integrated platform owner to sacrifice some profits (if any) in its distribution division in order to support an affiliated (or favored, third-party) application.

This essay focuses on identifying and fixing this potential regulatory gap when crafting a “net neutrality” policy—a set of rules or standards designed to spur innovation at the “edge” of the Internet by preventing Internet service providers (ISPs) from engaging in discriminatory conduct. But the essay could just as easily be directed at the powerful online platforms wielded by Amazon, Facebook, or Google. The applicability of this remedy to other parts of the Internet is natural, not because market power is paramount there (though it certainly exists), but because there is a large enough threat to innovation in adjacent markets to online shopping, social media, and search, respectively.

[Singer is Principal, Economists Inc., and Senior Fellow, George Washington Institute of Public Policy. The author has served as a consultant to both ISPs and independent cable networks in regulatory matters.]

Comments

This essay was complicated and seemed to strive to justify the chosen outcome from one hypothetical. Paid prioritization was treated as refusal to do business with and the paper alleged competitive ISPs could correct this approach. The trouble here is there is no alternative ISP in most markets for wired telecommunications. Yes there are many mobile smart-phone competitors and a few satellite ISPs. This is not competition but an alternative avenue.

The zero-rating of an affiliated content provider like DirectTV being zero-billed by ATT is clearly an illegal cartel. The Sherman Act and the FTCA both address this illegality as do the FCC Net Neutrality Open Internet Order of 2015.

The common carrier exemption within the FTCA could be easy fixed by adding a "when providing common carrier telecommunications" qualifying phrase. There can be arguments this qualification already applies as already argued by the FTC though ATT argued already the common carrier exemption applies to unrelated considerations. The District Court agreed but the Appellate Court then did not. The judicial and legislative history support the District Court requiring an amendment of the FTCA to decide via statute and not judicial FIAT.

15 USC §45(a)2 current:

  • (2) The Commission is hereby empowered and directed to prevent persons, partnerships, or corporations, except banks, savings and loan institutions described in section 57a(f)(3) of this title, Federal credit unions described in section 57a(f)(4) of this title, common carriers subject to the Acts to regulate commerce, air carriers and foreign air carriers subject to part A of subtitle VII of title 49, and persons, partnerships, or corporations insofar as they are subject to the Packers and Stockyards Act, 1921, as amended [7 U.S.C. 181 et seq.], except as provided in section 406(b) of said Act [7 U.S.C. 227(b)], from using unfair methods of competition in or affecting commerce and unfair or deceptive acts or practices in or affecting commerce.

15 USC §45(a)2 fix needed:

  • (2) The Commission is hereby empowered and directed to prevent persons, partnerships, or corporations, except banks, savings and loan institutions described in section 57a(f)(3) of this title, Federal credit unions described in section 57a(f)(4) of this title, common carriers subject to the Acts to regulate commerce (needs added)when providing telecommunications(needs added), air carriers and foreign air carriers subject to part A of subtitle VII of title 49, and persons, partnerships, or corporations insofar as they are subject to the Packers and Stockyards Act, 1921, as amended [7 U.S.C. 181 et seq.], except as provided in section 406(b) of said Act [7 U.S.C. 227(b)], from using unfair methods of competition in or affecting commerce and unfair or deceptive acts or practices in or affecting commerce.
CurtisNeeley on August 12, 2017 - 4:00pm.

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