More Common Carrier Regulation or Less?

For more than a century and a half, telecommunications was regarded as a natural monopoly. Few believe that any more, and especially few in the mobile telecom business.

On the other hand, new calls to regulate content and application businesses using the "common carrier" framework are growing, an exceptionally bad idea. The fundamental choice is "regulate more" or "regulate less."

More "level playing fields" arguably can be addressed using heavier regulation. It is doubtful innovation happens best that way, nor is it always clear that sustainable investment or more-robust competition can be produced by the "more regulation" approach.

Antitrust is very much top of mind as there are growing calls to subject Google and Facebook to antitrust action, if not regulating them as common carriers, and as AT&T goes to court to defend its proposed acquisition of Time Warner.

Some even speculate about common carrier regulation of firms such as Google and Facebook, a drastic move that would overturn traditional U.S. policy on data communications, which has used a “freedom” framework, not regulated common carrier principles.  

Some of us would argue regulating any app providers using the common carrier framework is a very bad idea, as it is a bad idea for a growing portion of the telecom business.  

The point is that two fundamental approaches to stimulating greater competition always exist in a market: restrict freedom of the leaders or promote freedom for attackers. Antitrust and regulation are examples of the former; deregulation an example of the latter.

Sometimes, it takes a big company to reshape markets and drive innovation. Apple is probably the best recent example. But Amazon might be the best example of what happens next. There is a myth that small nimble competitors will emerge to challenge Google, Facebook or Netflix.

That is unlikely to happen. It will take big firms to mount effective challenges to the leaders in internet ecosystem markets. Where small and young firms do have a chance to disrupt markets is the next wave of internet development. When was the last time a proposed startup got funded because it was going to challenge Google or Facebook, head to head?

More freedom, not less, is called for, if policymakers want more competition to Google and Facebook. Instead of “breaking up,” or “regulating” Google and Facebook, allow other firms--even if big--the freedom to mount their own challenges. That means, in part, allowing telcos to recreate their business models.