The issues around network neutrality and the tensions about who owes who and how much between content and carriage are perhaps superficial manifestations of a more fundamental issue about public and private roles in the provision and maintenance of common public infrastructure. But doing little other than hoping that Adam Smith’s invisible hand will solve all of this through the actions of competitive suppliers to an open market is probably just wishful thinking. It makes as little sense to festoon our streets with a myriad of cables from competing access carriers, as it does to lay down parallel railway tracks for competing railway service providers. In economic study, this is a case of the subadditivity of costs where the economies of scale do not compensate for the high level of sunk capital in duplicated infrastructure investment. It implies that the costs of service delivery from only one supplier is socially less expensive in terms of average costs than costs of production of a fraction of the original quantity by an number of competing suppliers. In general, an observation that a market has a property of subadditive costs is a necessary and sufficient condition to lead to the formation of natural monopolies is that market.
The Internet access market is not a market that naturally tends towards strong competition. The tyranny of sunk capital investment in infrastructure leads to a market that naturally aggregates, and such aggregation has an inevitable outcome in the formation of local monopolies. The “light touch” framework to Section 706 in Title I is just not an adequately robust regulatory framework for this space.
At its heart, the Internet access business really is a common carrier business. So my advice to the FCC is to take a deep breath, and simply say so.