Government’s Internet Monopoly

April 28, 2015

L. Gordon Crovitz

The Wall Street Journal

The Justice Department and Federal Communications Commission high-fived each other last week, teaming up to reject the $45 billion merger of Comcastand Time Warner Cable. There was no explanation of what law this consolidation in the declining cable industry would have violated, but Obamaadministration officials don’t let such details stand in their way.

Comcast and Time Warner don’t compete in any market in the U.S., which meant there was no antitrust problem. But departing Attorney General Eric Holder reinterpreted the antitrust laws to protect competitors instead of competition. He said his department acted to benefit “providers of content and streaming services.”

Business World Columnist Holman Jenkins Jr. on the Justice Department’s successful bid to break up a merger between media giants.

Content companies should be careful what they wish for. They benefit from government favoritism today, but is Netflix, with twice as many subscribers as Comcast and Time Warner combined, so big it can’t acquire or be acquired? Cable companies are losing customers, who increasingly prefer subscribing on the Internet directly to video from Netflix, Amazon Prime and HBO.

As broadband providers, cable companies and telecom companies are duopolists widely resented by consumers. President Obama used that resentment when he pressed the FCC to grab regulatory power over the Internet. But the rejection of the Comcast-Time Warner merger is a reminder that Obamanet has nothing to do with consumer choice and everything to do with regulatory power. Mr. Obama’s regulations replaced the permissionless Internet, where anyone could offer a new site or service. FCC Chairman Tom Wheeler defended government control by saying “there were no rules preventing broadband providers from conduct that would threaten the open Internet.”

If protecting competition or the open Internet had anything to do with the FCC’s new powers, this merger should have sailed through. Indeed, Comcast’s 100 lobbyists grew more confident about the merger once the FCC declared the Internet a public utility subject to “just and reasonable” practices determined by bureaucrats. That should mean consumers are at less risk from a larger broadband provider.

So why did the administration block the merger? It might have concluded it will lose the seven lawsuits filed so far against Obamanet. The plaintiffs argue that the supposedly independent agency acted arbitrarily by doing Mr. Obama’s bidding and defied congressional insistence on a lightly regulated Internet. Comcast said if regulators require it to abide by the new “net neutrality” rules even if they are invalidated in court, the company would walk away from the Time Warner deal.

Far from encouraging broadband competition, Obamanet entrenches the broadband status quo. By submitting the Internet to Title II of the Communications Act of 1934, the FCC subjects Internet access to rules written to protect the Ma Bell monopoly, not to encourage competition.

When it comes to broadband competition, government is the big problem. The most significant new competitor in broadband is Google Fiber, which launched in 2011 but has permission to build its fast service in fewer than two dozen communities across the country. Google Chairman Eric Schmidt, a longtime supporter of “net neutrality,” tried to lobby the White House against the radical step of applying Title II to the Internet, which adds new barriers to competition such as requiring universal service.

Google Fiber’s Milo Medin offered this assessment of Obamanet at the Comptel industry conference this month: “No consumers are seeing higher speeds than before the order was passed; no consumers are paying less for their Internet services than what they were paying for; no consumers are seeing higher volume caps than they had before; and no consumers have additional choice of providers than they had before.”

He added: “Some would argue that regulation is the answer, but I have never seen a company deliver better service because a federal rule existed.” Instead, “what we do need to do is build new networks and deliver better and faster services while offering consumers new choice that replaces bandwidth scarcity with bandwidth abundance.”

Google Fiber needs federal and local governments to deregulate by granting it and other new competitors more rights of way to lay fiber along existing highways, bridges, telephone poles and sewers. Mr. Medin called on the Transportation Department and Environmental Protection Agency to allow more open access. Local governments block new competitors by requiring large fees and favors for officials such as free government Web access.

The government’s monopoly control over broadband infrastructure limits which companies can offer broadband services. That—not mergers in the declining cable industry—is what leaves consumers limited choice in how to gain access to the Internet.

When it comes to monopoly power, Comcast and Time Warner Cable are nothing compared with the government.

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