Information Technology Reference
In-Depth Information
Current Economic, Political,
and Regulatory Environment
invest in next-generation networks. In a version of
the belief that there is such a thing as a free lunch,
the FCC predicted that the incumbents would still
possess incentives to make their facilities avail-
able to independent ISPs and, thus, there would
exist a healthy wholesale market for the critical
transmission access service. In short, the FCC
imagined a world in which there would generally
be competition in the provision of broadband
Internet access between several facilities-based
platforms (telephone, cable and potential entrants)
and that these platforms would remain open
and reasonably priced for non-facilities-based
competitors. (Non-facilities-based competitors
provide what is termed intramodal competition
since they rely on a specific platform utilizing a
particular technology.)
The FCC focus on increasing the incentives to
construct next generation broadband networks also
was revealed in its 2003 order in which the FCC
eliminated all network unbundling obligations
for incumbent telephone companies when they
construct fiber local loop facilities-to-the-premises
(FCC, 2003). This deregulatory treatment of fiber
investments was predicted by the FCC to jumpstart
a race to build next-generation broadband net-
works by both incumbents and potential entrants.
What the FCC calls predictive judgments were thus
critical in providing the underlying rationale for
such a significant deregulatory broadband policy.
In light of the virtual extinction of a role for
independent ISPs to provide broadband Internet
access service competition to facilities-based
incumbents, the FCC deregulatory broadband
policies unnerved two critical stakeholders, end
users and independent applications and content
companies. Each group relies on broadband Inter-
net access providers in order to conduct voluntary
exchanges with the other. The two-sided nature
of the broadband industry is illustrated in Figure
1. Traditionally, Internet charging arrangements
involve each side (points A and D) of the Internet
platform paying for its broadband connection to the
Internet and then being free to utilize that connec-
tion in any way it sees fit (Stifel Nicolaus, 2006).
Each side of the Internet platform is concerned
with the continuing openness of the platform.
These concerns, lumped together under the gen-
eral term “net neutrality,” have been explored, to
some extent, by recent FCC actions or inactions.
First, recognizing the controversial nature of its
decision to deregulate wireline broadband facil-
ities-based companies, the FCC created a set of
four principles to protect end users of Internet
services since ISP competition that resulted from
regulatory policies and the industry norm of treat-
ing packets in a neutral manner combined to
constrain the ability of network operators to engage
in unreasonable transmission discrimination. The
Figure 1. Two-sided nature of broadband markets
Search WWH ::
Custom Search