Posted by Social Science Research Network
Economic Findings Concerning the State of Competition for Wired Broadband Provision to US Households and Edge Providers
By David S. Evans (Global Economics Group)
Abstract: The Federal Communications Commission and the US Department of Justice, in the course of considering mergers and acquisitions as well as other policy matters, have conducted detailed investigations of the wired broadband business, and the intertwined business of providing linear programming. This paper summarizes the economic findings reached by the FCC and the Justice Department and their implications for public policy. These authorities have identified two significant market failures based on empirical studies, reviews of company documents, and other evidence. The first market failure results from the fact that large wired broadband providers are bottlenecks between edge providers and households and therefore able to exercise significant market power over edge providers by restricting access to households. The second market failure results from the fact that the large wired broadband providers also own large linear programming providers. The evidence shows that the companies that have common ownership over these related services have the incentives and abilities to harm edge providers that compete with their linear programming businesses. To prevent making these market failures from worsening, the FCC and Justice Department have blocked mergers or imposed conditions on the merging parties. The FCC and Justice Department findings are relevant for considering public policy towards the provision of wired broadband services to households and edge providers.
