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An Antitrust Analysis of the Case for Wireless Network Neutrality

  • Gregory Rosston

    ()

    (Stanford Institute for Economiy Policy Research, Stanford University)

  • Michael Topper
Registered author(s):

    The ongoing debate about possible implementation of regulatory rules requiring “network neutrality” for wireless telecommunications services is inherently about whether to impose a prohibition on the ability of network operators to control their vertical relationships. Antitrust analysis is well suited to analyze whether a wireless network neutrality rule is socially beneficial. Implementing network neutrality rules would be akin to using a per se antitrust rule regarding vertical relationships instead of the rule of reason analysis typically applied to vertical relationships in antitrust. Per se rules are used to prevent actions that rarely, if ever, have any pro-competitive benefits, such as price-fixing agreements. Rule of reason analysis is used when there are potential efficiency gains from the actions under investigation. Some vertical practices of the wireless carriers, such as bandwidth restrictions, may appear to be anticompetitive, but may also have plausible efficiency justifications so should be judged under rule of reason analysis. Economic examination of the wireless industry shows significant competition between networks which reduces the concern about vertical relationships, but some areas that should be monitored by antitrust and regulatory authorities. We propose several regulatory changes that would likely increase wireless competition and lessen the perceived need for prophlactic network neutrality rules while at the same time allowing efficiency-enhancing vertical relationships.

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    File URL: http://www-siepr.stanford.edu/repec/sip/08-040.pdf
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    Paper provided by Stanford Institute for Economic Policy Research in its series Discussion Papers with number 08-040.

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    Date of creation: Jul 2009
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    Handle: RePEc:sip:dpaper:08-040
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    1. repec:reg:rpubli:214 is not listed on IDEAS
    2. Mayo, John W. & Wallsten, Scott, 2010. "Enabling efficient wireless communications: The role of secondary spectrum markets," Information Economics and Policy, Elsevier, vol. 22(1), pages 61-72, March.
    3. David Waterman & Andrew Weiss, 1997. "Vertical Integration in Cable Television," Books, American Enterprise Institute, number 52923, 4.
    4. Mayo John W, 2008. "It's No Time to Regulate Wireless Telephony," The Economists' Voice, De Gruyter, vol. 5(1), pages 1-4, February.
    5. Farrell, Joseph & Weiser, Philip J., 2003. "Modularity, Vertical Integration, and Open Access Policies: Towards a Convergence of Antitrust and Regulation in the Internet Age," Department of Economics, Working Paper Series qt4dh7q2dd, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
    6. Mark L. Burton & David L. Kaserman & John W. Mayo, 2009. "Common Costs And Cross-Subsidies: Misestimation Versus Misallocation," Contemporary Economic Policy, Western Economic Association International, vol. 27(2), pages 193-199, 04.
    7. repec:reg:rpubli:577 is not listed on IDEAS
    8. Peter Cramton & Andrzej Skrzypacz & Robert Wilson, 2007. "The 700 MHz Spectrum Auction: An Opportunity to Protect Competition In a Consolidating Industry," Papers of Peter Cramton 07c700mhz, University of Maryland, Department of Economics - Peter Cramton, revised 2007.
    9. Beard, T Randolph & Kaserman, David L & Mayo, John W, 2001. "Regulation, Vertical Integration and Sabotage," Journal of Industrial Economics, Wiley Blackwell, vol. 49(3), pages 319-33, September.
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