Net Neutrality Thought Experiment

To clarify the net neutrality debate, imagine if Google made a hostile bid for Comcast.

This would place net neutrality opponents in an untenable position.  They essentially say it should be acceptable for a cable company to play favorites in internet service delivery;  but if that’s true, then there is nothing anti-competitive in Google owning a cable company.

Net neutrality opponents can’t have it both ways.  Either biased delivery is anti-competitive, or it isn’t.  If it is, then net neutrality wins. If not, then Google should be allowed to buy Comcast and throttle everyone else’s services.  Which would make no sense.

This is just a specific case of the more general fact that network-effect natural monopolies (railroads, cable companies, phone companies, Microsoft) defy normal microeconomics, because they have increasing returns to scale.  As a result, they tend to require regulation to ensure efficient market function.  In general, this regulation takes the form of forbidding bias in the freight delivered over the network.  So the railroad must carry anyone’s rail car, the phone network must carry any long-distance carrier’s call, Microsoft’s applications division should have been forced to split off from the OS division, and fiber networks should be forced to carry anyone’s traffic.

This applies only to network-effect natural monopolies, and not to other, weaker forms of market power.

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