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From Antitrust Law Daily, December 19, 2016

Sallet discusses protection of economic opportunity in broadband Internet access services market

By Linda O’Brien, J.D., LL.M.

Jon Sallet, Deputy Assistant Attorney General for Litigation at the Department of Justice Antitrust Division, reviewed the nature of broadband competition policy through the lenses of recent actions of the Antitrust Division of the Department of Justice and the Federal Communications Commission, in an address before the Capitol Forum Broadband Competition Conference in Washington, D.C. on December 16.

Sallet began his remarks entitled "Broadband Competition Policy: Final Thoughts and First Principles," by noting that competition is the best driver of innovation and consumer benefits by reducing prices, increasing output, and improving product quality. Although antitrust enforcement does not prescribe what price is right, what quantity should be products, or how returns should be invested, the competitive process provides a means of efficiently allocating society’s resources in a disaggregated, democratic way.

Broadband access and high-definition video streaming is seen as a fact of life and maybe even necessities. However, Sallet observed, in the current broadband market, many local broadband access markets remain dominated by one or two companies and competitive choices for broadband connections are not evenly distributed based on incomes or between urban and rural areas. Even in mobile broadband, there are only four national competitors that represent 98 percent of mobile service revenues. Measured at a national level, the industry is becoming more concentrated in recent years and the impacts of limited broadband competition extend to other complementary markets.

Of particular concern to policymakers over several decades has been the historical identification of the incentive and ability of telecommunications providers to use gatekeeper power—the ability to determine which traffic will reach consumers and on what terms—to threaten competition, according to Sallet. Statistics show that most Americans have little choice for high-speed broadband connections. Gatekeeper power might be exercised in ways that seem minor from one perspective but have considerable impact on competition from another. As an example, if an integrated broadband/multichannel video programming distributor (MVPD) selectively blocked a single rival online video distributor (OVD), the impact would be small to an individual consumer, but the effects would be large on the OVD seeking broad distribution to cover fixed costs, he noted.

The Antitrust Division and the Federal Communications Commission (FCC) work together to carefully scrutinized telecommunications transactions. Careful competition enforcement demands an understanding of market circumstances and of how competition is benefitting consumers, in Sallet’s view. In telecommunications, it means a forward looking focus since competition benefits consumers by driving innovation in the development of products and services—not by merely keeping prices down and output up. It also means a careful examination of the all of the markets in which actions by merging companies may cause harm.

FCC Open Internet rules. The debate in the development of the FCC’s Open Internet rules has helped foster wise public policy, Sallet noted. That debate has revealed that certain bright line rules can provide clarity, reduce administrative costs, and maximize welfare with little risk as well as other areas that deserve more cautious case-by-case scrutiny. The Internet is a marketplace of ideas and commerce and the Open Internet order is expressly premised on the importance of ensuring that controversial, political, or unpopular speech cannot be blocked or burdened.

It is important to remember the beneficiaries of sound policy in this arena are not only consumers who benefit when the competitive process delivers lower prices, greater output, and improved quality, but the new competitors whose presence may lower prices, increase output, and improve quality even more as well as bringing the fruits of innovation to benefits consumers and the economy at large, Sallet concluded.

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