Tuesday, December 17, 2002

Lessig & Epstein

This FT piece has Lessig & Epstein commenting on the whether or not open access provisions should apply to broadban providers. My sympathies are broadly with Epstein. Essentially, as I've documented many times before on this site, broadband internet access makes you choose between two of the following three: a) competition at the service level, b) competition at the infrastructure level, or c) investment in new infrastructure.

The Telecom Act of '96 required incumbent telco's to offer entrants access to their equipment (unbundled network elements, UNE) at marginal cost, which reduced investment in new infrastructure and forced telcos to offer special online services (which Lessig derides in his piece as being dangerous and discriminatory). If new legislation forced common carrier provisions on broadband service providers AND kept the UNE requirement, then incumbents would stop upgrading their facilities because they would have no incentive to do so.

Lessig, like many others, fears that incumbents will censor parts of the internet and charge high prices, but as Epstein argues, they have no incentive to do so as restricting access will merely reduce the value of the service to customer and so reduce their profits. As things stand now, the legislation is a subsidy to entrant telco providers (who do not invest in plant) and content industries. If people have examples of swathes of the Internet broadband providers are cutting of for profiteering reasons, I'd like to hear about them.


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