Policy Documents

No. 92 Access to the Internet: Regulation or Markets?

David B. Kopel –
September 1, 1999

The explosive growth of broadband Internet services for residential users is revolutionizing access to the Internet. This study asks whether, in light of these changes, regulation or markets are more likely to serve consumers best now and in the years ahead.

Part 1 examines the political and judicial battle currently taking place over access to the Internet. It quickly describes the technological changes that give rise to the debate, identifies the key players, and summarizes the current state of affairs in the legal and political arenas.

Part 2 presents the arguments being made for forcing cable companies to make their lines available on equally favorable terms to all Internet Service Providers, a proposal being promoted as “Open Access” but more accurately called “Forced Access.” The shortcomings of these arguments make clear that the real case for Forced Access, if one exists, requires deeper investigation.

Part 3 describes the companies and technologies that are creating competition in the Internet access marketplace, making it unlikely that cable and long-distance phone companies can secure a monopoly (or duopoly) over access to the Internet. Digital Subscriber Line (DSL) offers some important advantages over cable, as do satellite and terrestrial wireless technologies. Even electric utilities are getting into the broadband communications business. The diversity among broadband providers means the market is competitive and is likely to remain so in the future.

Part 4 takes a closer look at the companies that are lobbying for Forced Access to see if they do business according to the principles they claim are motivating their campaign. It does not appear to be so.

Part 5 examines the technological feasibility of Forced Access and finds a major impediment to the Forced Access cause. Part 6 asks if antitrust law should be brought to bear against AT&T and cable companies, and concludes that such law provides no rationale for Forced Access. Part 7 describes the negative effects on future investments in Internet and telecommunications infrastructure that would follow from adoption of Forced Access. Part 8 closes the study with a summary and concluding remarks. A glossary of terms and acronyms used in the study follows.