FTC Has Seen Potential Consumer Gains from Paid Prioitization

The reason economists and policymakers want competition in markets is that competition disciplines suppliers, producing greater benefits for consumers. With regard to prioritized handling of consumer internet packets, the Federal Trade Commission, which now has oversight over consumer protection of  internet access services, says more competition is coming.

That being the case, regulators should wait to see how practices develop, before trying to determine--in advance--whether new internet service provider policies are helpful or harmful.

“Many proponents of net neutrality regulation are concerned that broadband Internet access suppliers have market power in the last-mile access market and that they will leverage that power into adjacent content and applications markets in a way that will harm competition in those markets and, ultimately, consumers,” the FTC said.

Exclusive dealing arrangements, refusals to deal, vertical integration, or other unilateral conduct

“can be anticompetitive and harmful to consumers under certain conditions,” the FTC said.

But, the FTC also noted, such practices “can be procompetitive, capable of improving efficiency and consumer welfare, which involves, among other things, the prices that consumers pay, the quality of goods and services offered, and the choices that are available in the marketplace.”

“In evaluating whether new proscriptions are necessary, we advise proceeding with caution before enacting broad, ex ante restrictions in an unsettled, dynamic environment,” the FTC said.

“There is evidence that the broadband Internet access industry is moving in the direction of more, not less, competition, including fast growth, declining prices for higher-quality service, and the current market-leading technology (i.e., cable modem) losing share to the more recently deregulated major alternative (i.e., DSL),” the FTC said. “There also appears to be substantial agreement on the part of both proponents and opponents of net neutrality regulation that greater competition in the area of broadband Internet access would benefit consumers.”

“We recommend that policy makers proceed with caution in evaluating proposals to enact regulation in the area of broadband Internet access,” the FTC report said. “It is not possible to know in the abstract whether allowing content and applications providers to pay broadband providers for prioritized data transmission will be beneficial or harmful to consumers.”