Watching the “Lack of Competition” Meme

Ars Technica — a wonderful publication with brief, informative, and interesting pieces on technology — is showing a little sloppliness in covering the broadband competition issue. The question whether there is sufficient competition in the provision of broadband Internet service underlies the debate about "net neutrality" — whether there should be public utility regulation of broadband.

Discussing FTC chair Deborah Majoras’ speech at the PFF Aspen Summit, an Ars reporter casually observes, “[M]arket forces really do not exist when it comes to broadband.” That’s at least overstatement. A little more caution would be good given the centrality of the issue.

To show the existence of a duopoly (which is not inherently a competition-free situation), the report links to an earlier Ars piece interpreting a study as showing “not much” competition between DSL and cable. But that conclusion goes only to price competition. And it’s a little overstated, too.

The actual study, from a group called Kagan Research, seems to show that DSL is the low-cost option (and getting lower), while cable is the high-bandwidth option (getting higher in bandwidth while dropping in cost more slowly). That diminishes head-to-head price(-only) competition because each is focused on a different niche. But they’re still in competition.

The Kagan Research analyst concludes: “Eventually, cable will probably have make [sic] some reductions to cater to the lower end of the consumer market simply to get more customers.” So the study author believes more direct price competition is coming.

That’s some distance from “market forces really do not exist when it comes to broadband.” There is some price and quality competition among the major broadband platforms. Substitutes (such as getting broadband at work and getting information and entertainment offline) play a role in the competition question. And several competitors wait in the wings, to become viable through improvements in technology, new investment, or bad behavior by the current platforms.

I hasten to add that I am not satisfied with the current level of competition. I would like it to be more intense along all fronts and in all regions.