Thursday, March 31, 2011

The FCC Aims for Dominant Firms - Hits Little Guy

Always clear thinking Tom Hazlett has a new piece in the Financial Times on one foreseeable result of the new Net Neutrality rules (gated but free). The FCC feared that big telecom operators would favor their own affiliates at the cost of consumer choice. The first case demonstrates the limits, indeed the counter-productivity, of regulation.
MetroPCS, hit with its first formal complaint, is an upstart wireless network offering low prices and short-term contracts. As part of their $40 a month “all you can eat” voice, text and data plan, they slipped in a bonus: free, unlimited YouTube videos, customised to run fast and clear.

But is this monopolist favoring one service over another to its own benefit?
MetroPCS possesses no market power. With 8m customers, it is the country’s fifth largest mobile operator, less than one-tenth the size of Verizon. Under no theory could it force customers to patronise certain websites. It couldn’t extract monopoly cash if it tried to.

Rules meant to foster innovative services are thwarting them.


  1. I'm not really surprised. The theory of regulatory capture says that this is EXACTLY how things should result. Also, as MetroPCS is very fast growing due to having low rates, this is a lot like something out of an Ayn Rand novel.

  2. I forgot to add, this is likely to get overturned by the courts much like it was last time the FCC tried Net Neutrality.