A consumer-welfare approach to network neutrality regulation of the internet

Journal of Competition Law and Economics

Volumn 2, Issue 3, 2006, Pages 349-474

  Sidak, J Gregory ^a  

^a GEORGETOWN UNIVERSITY LAW CENTER   (United States)

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EID: 33846828281     PISSN: 17446414     EISSN: 17446422     Source Type: Journal    
DOI: 10.1093/joclec/nhl016     Document Type: Article

References (623)

1. Telecommunications Act of 1996, Pub. L. No. 104-104, 110 Stat. 56 (codified in scattered sections of 47 U.S.C.).
2. See Telecommunications Policy Review Panel, Canada, Final Report 187-90 (2006), available at http://www.telecomreview.ca/epic/internet/ intprp-gecrt.nsf/vwapj/report_e.pdf/$FILE/report.e.pdf
3. Viktória Kocsis & Paul W.J. de Bijl, Network Neutrality and the Nature of Competition Between Network Operators (TILEC Report Sept. 15, 2006) (prepared for Directorate General for Energy and Telecommunications, Ministry of Economic Affairs, The Hague);
4. Draft Report of the Study Group on a Framework for Competition Rules to Address the Transitions to IP-Based Networks, New Competition Promotion Program 2010, at 16-17, Annex 2, at 23-35 (July 2006) (study group recommendations to Japanese Ministry of Internal Affairs and Communications), available at http://www.soumu.go.jp/joho_tsusin/eng/ Releases/Telecommunications/pdf/news060719_1_02.pdf.
5. Organization for Economic Cooperation and Development, Network Neutrality: A Policy Overview (2006) [hereinafter OECD Network Neutraliy Study];
6. Mark Odell & Richard Waters, Move to Levy New Online Charges, Fin. Times, Mar. 28, 2006, available at http://www.ft.com/cms/s/ f0f2e74a-be9a-11da-b10f-0000779e2340.html.
7. See H.R. 5252, 109th Cong. (2006); Final Vote Results for Roll Call 239 on H.R. 5252, available at http://clerk.house.gov/evs/2006/roll239.xml
8. Stephen Labaton, House Backs Telecom Bill Favoring Phone Companies, N.Y Times, June 9, 2006, at C3.
9. See Hearing on Network Neutrality: Telecommunications Competition, Innovation, and Nondiscriminatory Access Before the H. Comm. on the Judiciary Antitrust Task Force, 109th Cong. (2006) (statement of Timothy Wu, Professor, Columbia Law School) ("a firm like AT&T...can, through implicit threats of degradation, extract a kind of protection money for those with the resources to pay up. It's basically the Tony Soprano model of networking...");
10. see also Lawrence Lessig & Robert W. McChesney, No Tolls on the Internet, Wash. Post, June 8, 2006, at A23 (repeating Wu's analogy to the Mafia).
11. Lessig & McChesney, supra note 4.
12. Hearing on Net Neutrality Before the S. Comm. on Commerce, Science, and Transp., 109th Cong. (2006) (statement of J. Gregory Sidak).
13. See, e.g., Jerry A. Hausman & J. Gregory Sidak, A Consumer-Welfare Approach to the Mandatory Unbundling of Telecommunication Networks, 109 Yale L.J. 417 (1999).
14. See William J. Baumol & J. Gregory Sidak, Toward Competition in Local Telephony 35-40 (MIT Press & AEI Press 1994);
15. William J. Baumol & David F. Bradford, Optimal Departures from Marginal Cost Pricing, 60 Am. Econ. Rev. 265 (1970);
16. see also Jean-Jacques Laffont & Jean Tirole, Competition in Telecommunications 60-65 (MIT Press 2000).
17. Frank Ramsey, A Contribution to the Theory of Taxation, 37 Econ. J. 47 (1927).
18. The relevance of Ramsey's seminal article to public utility pricing was first enunciated in Marcel Boiteux, Sur la Gestion des Monopoles Publics Astreints à l'Equilibre Budgétaire, 24 Econometrica 22 (1956),
19. republished in English as Marcel Boiteux, On the Management of Public Monopolies Subject to Budgetary Constraints, 3 J. Econ. Theory 219 (1971).
20. The seminal paper in the literature on network effects is Jeffrey Rohlfs, A Theory of Interdependent Demand for a Communications Service, 5 Bell. J. Econ. & Mgmt. Sci. 16 (1974).
21. For subsequent contributions to the literature, see Joseph Farrell & Garth Saloner, Installed Base and Compatibility: Innovation, Product Preannouncements, and Predation, 76 Am. Econ. Rev. 940 (1986);
22. Michael L. Katz & Carl Shapiro, Product Compatibility Choice in a Market with Technological Progress, 38 Oxford Econ. Papers 146 (1986);
23. Joseph Farrell & Garth Saloner, Standardization, Compatibility, and Innovation, 16 RAND J. Econ. 70 (1985);
24. Michael L. Katz & Carl Shapiro, Network Externalities, Competition, and Compatibility, 75 Am. Econ. Rev. 424 (1985).
25. See, e.g., Massimo Motta, Competition Policy: Theory and Practice 82 (Cambridge Univ. Press 2004);
26. Lester D. Taylor, Telecommunications Demand in Theory and Practice 9 (Kluwer Academic Press 1994);
27. Bridger M. Mitchell & Ingo Vogelsang, Telecommunications Pricing: Theory and Practice 11 (Cambridge Univ. Press 1991);
28. Jean Tirole, The Theory of Industrial Organization 405 (MIT Press 1988);
29. Stanley J. Liebowitz & Stephen E. Margolis, Network Effects, 1 Handbook of Telecommunications Economics 76 (Martin E. Cave, Sumit K. Majumadar & Ingo Vogelsang eds., 2002);
30. Nicholas Economides, The Economics of Networks, 16 Int'l J. Indus. Org. 673 (1996).
31. See, e.g., Milton L. Mueller, Jr., Universal Service: Competition, Interconnection, and Monopoly in the Making of the American Telephone System (MIT Press & AEI Press 1997).
32. See Christopher S. Yoo, Network Neutrality and the Economics of Congestion, 95 Geo. L.J. 1847 (2006);
33. Christopher S. Yoo, Beyond Network Neutrality, 19 Harv. J.L. & Tech. 1 (2005);
34. Christopher S. Yoo, Would Mandating Broadband Network Neutrality Help or Hurt Competition? A Comment on the End-to-End Debate, 3 J. Telecom. & High Tech. L. 23 (2004);
35. J. Gregory Sidak & Daniel F. Spulber, Cyberjam: The Law and Economics of Internet Congestion of the Telephone Network, 21 Harv. J.L. & Pub. Pol'y 327 (1998).
36. See Metro-Goldwyn-Mayer Studios, Inc. v. Grokster, Ltd., 545 U.S. 913, 915 (2005).
37. See Peter Jan Honigsberg, The Evolution and Revolution of Napster, 36 U.S.F. L. Rev 473, 475-76 (2002).
38. Id. at 476.
39. Id.
40. Id. at 474.
41. Id. at 474-75.
42. A&M Records, Inc. v. Napster, Inc., 239 F.3d 1004 (9th Cir. 2001).
43. Grokster, 125 S. Ct. 2764. The Court rejected Grokster's Sony "safe-harbor" defense under which "the sale of copying equipment, like the sale of other articles of commerce, does not constitute contributory infringement if the product is widely used for legitimate, unobjectionable purposes. Indeed, it need merely be capable of substantial non-infringing uses."
44. Id. at 2783
45. (quoting Sony Corp. of Am. v. Universal City Studios, Inc., 464 U.S. 417, 442 (1984)).
46. In Grokster, the Court held that "one who distributes a device with the object of promoting its use to infringe copyright, as shown by clear expression or other affirmative steps taken to foster infringement, is liable for the resulting acts of infringement by third parties." Id.
47. Bruno Giussani, The Fine Print, Wall St.J. Eur., Mar. 29, 2006.
48. Id.
49. Id.
50. See, e.g., David S. Evans, The Antitrust Economics of Multi-Sided Platform Markets, 20 Yale J. on Reg. 325 (2003);
51. Jean-Charles Rochet & Jean Tirole, Platform Competition in Two-Sided Markets, 4 J. Eur. Econ. Ass'n 990 (2003).
52. The seminal article on two-sided markets is William F. Baxter, Bank Interchange of Transactional Paper: Legal and Economic Perspectives, 26 J.L. & Econ. 541 (1983).
53. Robert W. Crandall & J. Gregory Sidak, Competition and Regulatory Policies for Interactive Broadband Networks, 68 S. Cal. L. Rev. 1203, 1219-20 (1995).
54. As of January 2006, Verizon had spent $2 billion on its fiber-to-the-home "FiOS" network. See John Dix, Verizon Counting on FiOS Advantage, Network World, Jan. 23, 2006, available at http://www.networkingsmallbusiness.com/columnists/2006/012306edit.html.
55. HSBC Global Research, Net Neutrality: Telecoms Must Monetise the Net Rather Than Be Trapped in It - We Set out Our 'ABC' Path to Freedom 25 (2006).
56. See, e.g., Michael Kende, The Digital Handshake: Connecting Internet Backbones, OPP Working Paper No. 32, at 4, available at http://www.fee.gov/Bureaus/OPP/working_papers/oppwp32.pdf.
57. Id.
58. Id. at 5.
59. Id.
60. Id. at 7.
61. Id. at 6.
62. Best-efforts delivery of data packets provides no error checking or tracking, and no guarantee of delivery. See Behrouz A. Forouzan, TCP/IP Protocol Suite 33 (McGraw Hill 2d ed. 2003). Forouzan analogizes best-efforts delivery of data packets to the physical delivery of mail: The post office does its best to deliver the mail but does not always succeed. If an unregistered letter is lost, it is up to the sender or would-be recipient to discover the loss and rectify the problem. The post office itself does not keep track of every letter and cannot notify a sender of loss or damage.
63. See, e.g., Akamai Technologies, Inc., Annual Report (S.E.C. Form 10-K), at 13 (Mar. 16, 2006) ("In 2005, we began commercial sales of our Web Application Accelerator service, which is designed to improve the performance of Web- and IP-based applications through a combination of dynamic caching, compression of large packets, routing and connection optimization.").
64. The RFC document series is a set of technical and organizational notes about the Internet that was first published at UCLA in 1969. See 30 Years of RFCs, Apr. 7, 1999, available at ftp://ftp.rfc-editor.org/ in-notes/rfc2555.txt.
65. Vinton Cerf, Yogen Dalai & Carl Sunshine, RFC 675-Specifications of Internet Transmission Control Program, Dec. 1974, available at http://www.faqs.org/rfcs/rfc675.html (emphasis in original).
66. Information Sciences Institute, Internet Protocol Darpa Internet Program Protocol Specification, RFC 791, Sept. 1981, available at http://www.ietf.org/rfc/rfc0791.txt.
67. Robert Braden, David Clark & Scott Shenker, Integrated Services in the Internet Architecture: An Overview RFC 1633, Jun. 1994, at 3, available at http://www.ietf.org/rfc/rfc1633.txt.
68. Id. at 3-4 ("In the case of simple priority, the issue is that as soon as there are too many real-time streams competing for the higher priority, every stream is degraded. Restricting our service to this single failure mode is unacceptable.").
69. See Douglas E. Comer, Internetworking with TCP/IP vol I: Principles, Protocols, and Architecture 99 (Prentice Hall 4th ed. 2000).
70. Id. In binary, three digits are required to count to the number seven.
71. Id.
72. Id.
73. Id. at 601.
74. See Jeff Doyle, CCIE Professional Development: Routing TCP/IP 820 (Cisco Press 1998).
75. Id.
76. Id. at 820.
77. Id. at 822.
78. See Comer, supra note 41, at 236.
79. Id.
80. Id.
81. Id.
82. Id. at 28.
83. See, e.g., Michael Katz & Harvey Rosen, Microeconomics 398-99 (McGraw-Hill 3d ed. 1998).
84. See Richard Schmalensee, Output and Welfare Implications of Monopolistic Third-Degree Price Discrimination, 71 Am. Econ. Rev. 242 (1981);
85. Marius Schwartz, Third-Degree Price Discrimination and Output: Generalizing a Welfare Result, 80 Am. Econ. Rev. 1259 (1990);
86. Hal R. Varian, Price Discrimination and Social Welfare, 75 Am. Econ. Rev. 870 (1985).
87. See William J. Baumol & Daniel G. Swanson, The New Economy and Ubiquitous Competitive Price Discrimination: Identifying Defensible Criteria of Market Power, 70 Antitrust L.J. 661 (2003).
88. Id. at 662.
89. Id.
90. An interesting question - which I posed to Baumol at a conference in September 2005 - is whether the vector of prices chosen by a multiproduct firm that was compelled by competition to resort to price discrimination would be identical to the vector of prices that would result from a regulated multiproduct monopolist setting Ramsey prices. (As noted earlier, Ramsey prices are the vector of prices that maximize the sum of consumer and producer surplus, subject to the constraint that the firm breaks even.) On further reflection, that conjecture requires modification. Owing to economics of scale, a multiproduct monopolist supplying the entire market for a given product would presumably have lower marginal costs than would one of several competing firms supplying the same market. Therefore, the monopolist's revenue requirement to break even would be lower than the sum of the revenue requirements of the several competing firms. Intuitively, however, it would seem to be the case that, if the regulated monopolist and each of the competing firms had the same cost structure,the vector of Ramsey markups of price over marginal cost would be identical in the two situations.
91. See, e.g., Jean-Jacques Laffont & Jean Tirole, A Theory of Incentives in Procurement and Regulation 172-73 (MIT Press 1993).
92. This section draws from John C. Panzar & J. Gregory Sidak, When Does an Optimal Tariff Not Lead to a Pareto Improvement? The Ambiguous Effects of Self-Selecting Nonlinear Pricing When Demand Is Interdependent or Firms Do Not Maximize Profit, 2 J. Competition L. & Econ. 285 (2006).
93. Robert D. Willig, Pareto Superior Nonlinear Outlay Schedules, 11 Bell J. Econ. 56 (1978).
94. See, e.g., William J. Baumol, Superfairness 7-9 (MIT Press 1986).
95. Loretto v. Teleprompter Manhattan CATV Corp., 458 U.S. 419, 433 (1982) (quoting Kaiser Aetna v. United States, 444 U.S. 164, 176 (1979));
96. see also Phillips v. Wash. Legal Found., 524 U.S. 156, 167 (1998);
97. Ruckelshaus v. Monsanto Co., 467 U.S. 986, 1003 (1984).
98. Loretto, 458 U.S. at 420.
99. See, e.g., Manufactured Hous. Cmtys. of Wash. v. State, 13 P.3d 183, 191 (Wash. 2000) ("The substantial value of property lies in its use, and if the right of use is denied, the value of the property is annihilated and ownership is rendered a barren right.");
100. see also Richard Epstein, Property and Necessity, 13 Harv. J.L. & Pub. Pol'y 2, 3 (1990) ("If we stopped with possession, we would have a system of property rights that worked up to a grand blockade... The world would remain a tundra, in which I could keep my own place on the barren square of the checkerboard. To fill in the gaps, a system of use rights is associated with property. Now more than blockade is at stake; you get production as well - a vast improvement.").
101. Restatement (Second) of Torts §217 (1965).
102. See eBay v. Bidder's Edge, Inc., 100 F. Supp. 2d 1058 (N.D. Cal. 2000);
103. Register.com, Inc. v. Verio, Inc., 126 F. Supp. 2d 238 (S.D.N.Y. 2000), aff'd, 356 F.3d 393 (2d Cir. 2004);
104. America Online, Inc., v. IMS, 24 F. Supp. 2d 548 (E.D. Va. 1998);
105. America Online, Inc., v. LCGM, Inc., 46 F. Supp. 2d 444 (E.D. Va. 1998);
106. Hotmail Corp. v. Van Money Pie Inc., 47 U.S.P.Q.2d 1020, 1998 WL 388389 (N.D. Cal. 1998);
107. CompuServe Inc. v Cyber Promotions Inc., 962 F. Supp. 1015 (S.D. Ohio 1997).
108. eBay, 100 F. Supp. 2d at 1070;
109. America Online v. LCGM, 46 F. Supp. 2d at 453;
110. CompuServe, 962 F. Supp. at 1024.
111. Restatement (Second) of Torts §259 (1965).
112. Lloyd Corp., v. Tanner, 407 U.S. 551, 569 (1972).
113. See eBay, 100 F. Supp. 2d at 1070;
114. America Online v. LCGM, 46 F. Supp. 2d at 448;
115. CompuServe, 962 F. Supp. at 1024.
116. See eBay, 100 F. Supp. 2d at 1070;
117. Register. com, 126F. Supp. 2d at 249;
118. America Online v. IMS, 24 F. Supp. 2d at 550;
119. Restatement (Second) of Torts §217 comment (f) (1965).
120. Restatement (Second) of Torts §218 (1965).
121. See eBay, 100 F. Supp. 2d at 1066;
122. America Online v. IMS, 24 F. Supp. 2d at 550;
123. America Online v. LCGM, 46 F. Supp. 2d at 449.
124. CompuServe, 962 F. Supp. at 1022.
125. eBay, 100 F. Supp. 2d at 1071.
126. Id.
127. Id.
128. Id.
129. Oyster Software, Inc. v. Forms Processing, Inc., No. C-00-0724 JCS, 2001 WL 1736382 at 13 (N.D. Cal. 2001);
130. Register.com, 126 F. Supp. 2d at 250-51.
131. Restatement (Second) of Torts §218 comment (e) (1965).
132. Phillips v. Wash. Legal Found., 524 U.S. 156 (1998).
133. For representative statements to the same effect by state supreme courts, see Rush v. State, Dept. of Natural Res., 98 P.3d 551, 555 (Alaska 2004) (quoting O'Conner v. City of Moscow, 202 P.2d 401, 404 (Idaho 1949) ("A property right consists not merely in its ownership and possession, but in the unrestricted right of disposal.")
134. Harris v. Harris, 493 P.2d 407, 408 (N.M. 1972) ("Subject to certain limitations and restrictions, an owner may dispose of his real and personal property...in such manner as he sees fit.")
135. Gilbreath v. Gilbreath, 177 So.2d 915, 918 (Ala. 1965) (One should not be deprived of sacred right to dispose of his property without urgent reason and courts must be extremely careful not to interfere with right of free disposal which inheres in ownership of property.).
136. have made the same argument with respect to antitrust intervention into the innovative activities of a firm possessing market power. See J. Gregory Sidak, Debunking Predatory Innovation, 83 Colum. L. Rev. 1121 (1983).
137. Lawrence Lessig, The Future of Ideas: The Fate of the Commons in a Connected World 61 (Random House 2001).
138. See Hausman & Sidak, supra note 7.
139. Vincent v. Lake Erie Transp. Co., 124N.W. 221 (Minn. 1910);
140. Ploof v. Putnam, 71 A. 188 (Vt. 1908).
141. There is, of course, a powerful justification for this exception to trespass that is rooted in economic efficiency. See Richard A. Posner, Economic Analysis of Law 174 (Little, Brown & Co. 4th ed. 1992) (discussing Ploof and Vincent).
142. Kimball Laundry Co. v. United States, 338 U.S. 1 (1949). Kimball Laundry established that the correct measure of just compensation is the property owner's opportunity cost. Where income-generating business facilities are appropriated on an ongoing basis for government use, or where the government grants third parties mandatory right of access to and use of that property, compensation for that involuntary exchange is "just" if it equals the price to which a willing buyer and a willing seller would agree. Justice Frankfurter wrote for the Court: The value compensable under the Fifth Amendment... is only that value which is capable of transfer from owner to owner and thus of exchange for some equivalent. Its measure is the amount of that equivalent. But since a transfer brought about by eminent domain is not a voluntary exchange, this amount can be determined only by a guess, as well informed as possible, as to what the equivalent would probably have been had a voluntary exchange taken place.
143. 338 U.S. 5-6;
144. accord, Olson v. United States, 292 U.S. 246, 255 (1934);
145. United States v. Reynolds, 397 U.S. 14, 16 (1970). Subsequent scholarship has further explained the economic reasoning behind this insight that just compensation should replicate the outcome of voluntary exchange.
146. See J. Gregory Sidak & Daniel F. Spulder, Deregulatory Takings and the Regulatory Contract: The Competitive Transformation of Network Industries in the United States 273-81 (Cambridge Univ. Press 1997);
147. Richard A. Epstien, Taking: Private Property and the Power of Eminent Domain 182 (Harvard Univ. Press 1985).
148. The voluntary-exchange standard corresponds to the concept of opportunity cost, which Professor Armen Alchian classically defined as follows: "the cost of an event is the highest-valued opportunity necessarily forsaken." Armen A. Alchian, Cost, in David L. Sills, ed., 3 International Ecyclopedia of the Social Sciences 404 (Macmillan Co. & The Free Press 1968).
149. eBay v. Bidder's Edge, Inc., 100 F. Supp. 2d 1058, 1071 (N.D. Cal. 2000).
150. But see Intel Corp. v. Hamidi, 71 P.3d 296 (Cal. 2003) (rejecting trespass to chattel theory in the case of mass emails sent to Intel employees over Intel's email system by a former employee critical of the company's employment practices).
151. See, e.g., Richard A. Posner & Frank H. Easterbrook, Antitrust Law: Cases and Materials 1-18 (West Publishing 2d ed. 1981) (discussing common law of restraint of trade).
152. U.S.C. §1 (2004).
153. One can regard antitrust law as a system of rights permitting producers to undertake noncollusive strategies to extract consumer surplus. See J. Gregory Sidak, Note, Rethinking Antitrust Damages, 33 Stan. L. Rev. 329 (1981).
154. In most situations, competitive constraints on market power will frustrate those strategies, such that consumers retain consumer surplus. See, e.g., Baumol & Swanson, supra note 57. For regulators to ban all such unilateral strategies, however, would dull the incentives for firms to undertake such welfare-increasing strategies in the first place.
155. See, e.g., Robert W Crandall, After the Breakup: U.S. Telecommunications in q More Competitive Era 88 (The Brookings Institution 1991);
156. Michael K. Kellog, John Thorne & Peter W Huber, Federal Communications Law 501 (Little, Brown & Co. 1992).
157. Hush-a-Phone Corp., 20 F.C.C. 391, 420 (1955).
158. Hush-a-Phone Corp. v. United States, 238 F.2d 266, 269 (D.C. Cit. 1956).
159. Hush-a-Phone Corp., 22 F.C.C. 112, 113 (1957).
160. Use of the Carterfone Device in Message Toll Telephone Services; Thomas R Carter v. AT & T, Dkt. Nos. 16942 and 17073, 14 F.C.C.2d 571 (1968).
161. Id. at 571.
162. C.F.R. 68
163. Hush-a-Phone, 22 F.C.C. at 113.
164. Frederick S. Hillier & Gerald J. Lieberman, Introduction to Operations Research 767 (McGraw Hill 8th ed. 2005).
165. The first applications of queuing theory, in the early twentieth century, were in the design of telephone networks. Id. at 772.
166. Hush-a-Phone, 22 F.C.C. at 113.
167. See Ronald H. Coase, The Nature of the Firm, 4 Economica (N.S.) 386 (1937).
168. For a subsequent overview of the field, see Oliver E. Williamson, The Mechanisms of Governance (Oxford Univ. Press 1996).
169. For detailed economic and legal analyses of the MFJ's line-of-business restrictions, See Paul W MacAvoy, The Failure of Antitrust and Regulation to Establish Competition in Long-Distance Telephone Services 35-81, 175-200 (MIT Press & AE1 Press 1996)
170. Sidak & Spulber, supra note 89, at 55-99;
171. Kellog, Thorne & Huber, Supra note 94, at 291-342.
172. See 47 U.S.C. §§ 271-72 (1996) (specifying conditions for BOC entry into interLATA market).
173. See J. Gregory Sidak, The Failure of Good Intentions: The WorldCom Fraud and the Collapse of American Telecommunications After Deregulation, 20 Yale. J. on Reg. 207, 257-58 (2003).
174. See Verizon Communications, Inc. v. Law Offices of Curtis V Trinko, 540 U.S. 398, 411-12 (2004).
175. Hush-a-Phone, 22 F.C.C. at 113.
176. See, e.g., OECD Network Neutrality Study, supra note 2, at 12 (discussing "jitter" caused by delay in VoIP service).
177. See, e.g., id.
178. See Aspen Skiing Co. v. Aspen Highlands Skiing Corp., 472 U.S. 585 (1985);
179. Otter Tail Power Co. v. United States, 410 U.S. 366 (1973)
180. Verizon Communications Inc. v. Law Offices of Curtis V. Trinko, 540 U.S. 398 (2004)
181. See, e.g., Trinko, 540 U.S. at 407 ("It is settled law that this offense [violation of the duty to deal] requires... the possession of monopoly power in the relevant market... ").
182. VoIP providers themselves recommend a minimum transmission speed of only 90 Kbps.
183. See Vonage Website, Vonage Basics, www.vonage.com. However, even speeds as low as 56Kbps may be used for VoIR.
184. See Marguerite Reardon, Beware of Broadband Speed Overkill, CNET NEWS, May 17, 2006, http://news.com.com/ 2102-1034_3-607308l.html?tag-st.util.print [hereinafter Reardon].
185. See, e.g., Hausman & Sidak, supra note 7, at 477-79 (discussing critical share of marginal customers required to defeat an attempted exercise of market power);
186. Dennis L. Weisman, When Can Regulation Defer to Competition for Constraining Market Power?: Complements and Critical Elasticities, 2 J. Competition L. & Econ. 101 (2006) (formalizing critical-share analysis in the presence of demand complementarities).
187. At the end of 2005, dial-up service comprised 41.5% of the market for Internet services. See Bernstein Research, Broadband Update: "Value Share" and "Subscriber Share" Have Diverged, Apr. 7, 2006, at 7. This number leaves 59.5% of the market for which various types of high-speed Internet providers may compete, making it extremely unlikely that any one type of high-speed Internet provider would have monopoly power that could be relied upon as a basis to impose upon it a duty to deal with competitors who supply VoIP service. To be sure, dial-up's share of the market is decreasing, but it nevertheless makes up a significant share of the market at the present time.
188. As I explain in Section IV.B.1.a infta, discrimination against an unaffiliated provider of VoIP service is more plausible in the case of a rural telephone company serving an area that lacks a digital cable television system.
189. Other forms of high-speed Internet service exist as well, including fiber, satellite or other wireless access, and even access over power lines. See Federal Communications Commission, High-Speed Services for Internet Access: Status as of June 30, 2005, at tbl.1 (2006).
190. DSL and cable are, however, the two primary technologies in the high-speed Internet market, collectively having about 95 percent of the market in the most recent FCC data. See id. Some differences exist between these technologies in terms of how much they cost or how fast the connection they provide is and thus they may appeal to different segments of the population, but all of them provide services that can be used for VoIP. These differences would only be relevant if VoIP were specifically trying to target one segment of individuals who are more likely to use one type of high-speed Internet service rather than another. If instead the assumption is that uses of high-speed Internet are viewed by VoIP competitors as being in the same market for VoIP services, then differences between the specific packages offered by high-speed Internet provides should matter little.
191. See Federal Communications Commission, High-Speed Services for Internet Access: Status as of June 30, 2005, at tbl.1 (2006).
192. See Eastman Kodak Co. v. Image Technical Servs., Inc., 504 U.S. 451,481 (1992) (describing a prior case as holding that "over two-thirds of a market is a monopoly");
193. United States v. Grinnell Corp., 384 U.S. 563, 571 (1966) (finding monopoly power with 87 percent of the market);
194. United States v. E.I. du Pont de Nemours & Co., 351 U.S. 377, 379 (1956) (finding that 75 percent market share can be assumed to be monopoly power). Even focusing exclusively on high-speed Internet, neither cable nor DSL meets this two-thirds threshold. And if one includes dial-up Internet providers in the market as well, cable and DSL's market shares are both cut by approximately 0 percent.
195. See Bernstein Research, Broadband Update, supra note 116.
196. One might also argue that each high-speed Internet provider is a monopolist with regard to the customers that it already has, even if it is not a monopolist in the competition for new customers, because customers who choose a high-speed Internet service are locked-in to it. Cf. Eastman Kodak Co. v. Image Technical Servs., Inc., 504 U.S. 451 (1992) (holding that Kodak had market power in the parts for its copy machines even though Kodak lacked market power in the market for copy machines itself). However, any lock-in effects with a certain type of Internet service are relatively brief, and thus will not suffice to sustain a claim of monopoly power over incumbent customers.
197. See Federal Communications Commission, High-Speed Services for Internet Access: Status as of Dec. 30, 2005, at tbl. 15. The remaining one percent of zip codes have no access to high speed Internet providers.
198. See id. at tbl.9. There may be some exceptions to this general statement because the FCC has redacted the state-by-state data on DSL and/or cable usage for some states and territories (including Massachusetts, Connecticut, Rhode Island, and Delaware), making comparisons difficult. In general, though, the statement is apt.
199. See id. at tbl. 14.
200. Cf. United States v. Terminal R.R. Ass'n, 224 U.S. 383 (1912) (imposing a duty to deal on a cartel of railroad companies that discriminated against its rivals).
201. For an analysis of Terminal Railroad, see Abbott B. Lipsky, Jr. & J. Gregory Sidak, Essential Facilities, 51 Stan. L. Rev. 1187 (1999).
202. See, e.g., Trinko, 540 U.S. at 407 ("To safeguard the incentive, to innovate, the possession of monopoly power will not be found unlawful unless it is accompanied by an element of anticompetitive conduct.").
203. Id. at 408.
204. Id. at 407-08.
205. Id.
206. See Einer Elhauge, Defining Better Monopolization Standards, 56 Stan. L. Rev. 253, 308-10 (2003).
207. Id. at 308.
208. Id.
209. For example, monopoly power would still need to be proved, as would the fact that the sharing is efficient in the ex post world. See id. at 310-11.
210. See Trinko, 540 U. S. at 409-10.
211. At one point, the Court in Trinko suggested that a prior course of dealing with the now-discriminated-against rival may be an important prerequisite to assert a duty to deal claim. Id. at 409.
212. However, this rule would neither be consistent with prior cases - Otter Tail, for example, involved discrimination against a new entrant that
213. Trinko, 540 U.S. at 409.
214. Id. at 410.
215. Id.
216. Id. at 411-15.
217. Id. at 410.
218. See Lipsky & Sidak, supra note 125, at 1231.
219. Review of the Section 251 Unbundling Obligations of Local Incumbent Exchange Carriers, Report and Order, CC Dkt. No. 01-338, 18 F.C.C.R. 16,978 (2003).
220. Id. at 16984 4¶.
221. Id. at 16988.
222. Appropriate Framework for Broadband Access to the Internet Over Wireline Facilities, Report and Order, CC Dkt. No. 02-33, 20 F.C.C.R. 14,853 (2005).
223. Id. at 14858 ¶¶ 5-7.
224. Id. at 14899 ¶86.
225. Id. at 14905-14907 ¶¶ 98-99.
226. Id. at 14899-14901 ¶¶ 87-89.
227. For further analysis of the Broadband Order, see J. Steven Rich, Brand X and the Wireline Broadband Report and Order: The Beginning of the End of the Distinction Between Title I and Title II Services, 58 Fed. Comm. L.J. 221 (2006).
228. Earthlink v. FCC, No. 05-1087, at 2 (D.C. Cir. Aug. 15, 2006).
229. Id. at 15.
230. Id. at 27.
231. National Cable & Telecomm. Ass'n v. Brand X Internet Servs., 545 U.S. 967, 974 (2005).
232. Id.
233. Id.
234. For an estimate of the cross-price elasticity of demand for cable modem service and DSL service, see Robert W. Crandall, J. Gregory Sidak & Hal J. Singer, The Empirical Case Against Asymmetric Regulation of Broadband Internet Access, 17 Berkeley Tech. L.J. 954, 973 (2002).
235. According to the National Cable and Telecommunications Association (NCTA) estimates for 2006, cable modem service was available to 96 percent of U.S. households. See NCTA, 2006 Industry Overview (2006), http://i.ncta.com/ncta_com/PDFs/NCTAAnnual%20Report4-06FINAL.pdf.
236. Industry Analysis and Technology Division, Federal Communications Commission, High-Speed Services for Internet Access: Status as of December 31, 2004 Table 1 (2005), http://www.fcc.gov/Bureaus/ Common_Carrier/Reports/FCC-State_Link/IAD/hspd0705.pdf.
237. The Strategis Group, High Speed Internet Access, 1998-99, at tbl. 9.5 (1999).
238. Consumer Search, ISPs Review (2005), http://www.consumersearch.com/www/ internet/isp/index.html.
239. See Verizon Communications Inc., Annual Report (Form 10-K), at 19 (Mar. 14, 2006).
240. NCTA, Cable's Private Investment, http://www.ncta.com/ ContentView.aspx?contentId=55 (citing Kagan Research).
241. Industry Analysis and Technology Division, Federal Communications Commission, supra note 157, at 2.
242. Implementation of Section 6002(b) of the Omnibus Budget Reconciliation Act of 1993, Seventh Report, 17 F.C.C.R. 12,985, 13,062-63 (2002) [hereinafter Seventh CMRS Report].
243. See Intel, Hotspots by Region, http://intel.jiwire.com/ hot-spot-directory-browse-by-state.htm?country_id=1 (last visited on July 6, 2006).
244. See NTT DocoMo, Annual Report (Form 20-F), at 4-5 (June 27, 2006);
245. NTT DoCoMo, Company Overview, http://www.nttdocomo.com/about/company/ index.html (2006).
246. Implementation of Section 6002 (b) of the Omnibus Budget Reconciliation Act of 1993, Ninth Report, 19 F.C.C.R. 19,597, 20,660 (2004) [hereinafter Ninth CMRS Report].
247. Walter S. Mossberg, Watching TV on Your Cellphone, Wall St. J., Sept. 1, 2004, at D7.
248. Sprint Offers Fox News To Channel Lineup, Wireless Week., Apr. 19, 2005.
249. Walter S. Mossberg, Verizon Devices Use High-Speed Network for Voice, Web, E-Mail, Wall St: J., Dec. 16 2004, at B1.
250. Press Release, Cingular, Cingular Goes Live With MobiTV (Jan. 25, 2005).
251. Mossberg, supra note 169.
252. Id.;
253. Press Release, Verizon Wireless, On-Demand in the Palm of Your Hand: Verizon Wireless Launches "VCAST" - Nation's First and Only Consumer 3G Multimedia Service (Jan. 7, 2005);
254. Press Release, Verizon Wireless, Now Playing on a Cell Phone Near You: Video Clips, Music Videos and 3D Games (Jan. 31, 2005).
255. Press Release, Verizon Wireless, Now Playing, supra note 172.
256. Implementation of Section 6002(b) ofthe Omnibus Budget Reconciliation Act of 1993, Tenth Report, 20 F.C.C.R. 15, at 1¶42 (2005) [hereinafter Tenth CMRS Report].
257. Wireline Competition Bureau, Federal Communications Commission, High-Speed Services For Internet Access: Status as of June 30, 2005, at tbl. 1 (2006).
258. Id.
259. Id. at tbl. 10.
260. Id. at 1.
261. Zip codes were divided into deciles as of the 2000 Census. The least densely populated zip codes (the lowest decile group) contained fewer than six persons per square mile. The most densely populated zip codes (the highest decile group) contained more than 3,147 persons per square mile. Id.
262. Id. at tbl. 18.
263. Id.
264. NCTA, Cable Broadband Availability, http://www.ncta.com/ ContentView.aspx?contentId=60 (citing Morgan Stanley Equity Research).
265. Wireline Competition Bureau, Federal Communications Commission, supra note 175, at tbl. 14.
266. Gov't Accountability Office, GAO-06-426, Broadband Deployment Is Extensive Throughout the United States, But It Is Difficult to Assess the Extent of Deployment Gaps in Rural Areas 15 (2006) (emphasis in original).
267. Id. at 37.
268. Id. at 59.
269. Id.
270. Id. at 60;
271. Cisco Systems, Capacity, Coverage, and Deployment Considerations For IEEE 802.11g (2006), http://www.cisco.com/en/US/products/hw/wireless/ ps4570/products_white_paper09186a00801d61a3.shtml.
272. See Intel, Hotspots by Region, http://intel.jiwire.com/ hot-spot-directory-browse-by-state.htm?country_id=1 (last visited on July 6, 2006).
273. Press Release, Earthlink, Earthlink and Google Submit Joint RFP For City of San Francisco Wireless Broadband Network (Feb. 21, 2006), http://www.earthlink.net/about/press/pr_san_francisco_network/.
274. Gov't Accountability Office, supra note 184, at 60.
275. Id.
276. Amol Sharma & Don Clark, Sprint to Spend Up to $3 Billion To Build Network Using WiMAX - New Wireless-System Plan Shows Belief in Demand For Mobile Internet Services, Wall St. J., Aug. 9, 2006, at B2.
277. Arshad Mohammed, Sprint Nextel to Build $2.5 Billion Wireless Network; Internet Access Expected to Cover More Distance Than WiFi at Speeds Similar to DSL, Wash. Post, Aug. 9, 2006, at D04.
278. John Markoff & Ken Belson, Sprint Will Build an Intel Backed Network, N.Y. Times, Aug. 8, 2006, at 7.
279. Amol Sharma & Don Clark, Two Technology Giants Clash In Battle for Wireless Internet, Wall St. J., Aug. 24, 2006, at A1.
280. Wi-Fi to the Max, Wall. St. J., Aug. 9, 2006, at A10 ("Those who want to regulate broadband providers are saying that the phone and cable networks are too valuable and too hard to replicate for anyone to break up the duopoly. We guess Sprint did not get the memo.").
281. Gov't Accountability Office, supra note 184, at 60.
282. Id. at 61.
283. Ninth CMRS Report, supra note 166, at 20,681.
284. CIA, The World Factbook Japan, http://www.cia.gov/cia/publications/ factbook/geos/ja.html (June 29, 2006).
285. Telecommunications Carriers Association, TCA Japanese Subscriber Statistics, http://www.tca.or.jp/eng/database/daisu/index.html (last visited on Mar. 13, 2006).
286. Bear Stearns, March Broadband Buzz: A Monthly Update on Critical Broadband Issues 6 (2006).
287. Press Release, AT&T, New AT&T Offers Customers $12.99 Online Promotion for High Speed Internet (Feb. 3, 2006), http://att.sbc.com/gen/press-room?pid=4800&cdvn= news&newsarticleid=22076.
288. Bernstein Research, Broadband Update, supra note 116, at 4.
289. Bear Stearns, March Broadband Buzz, supra note 203, at 6.
290. Id.
291. Bernstein Research, Broadband Update, supra note 116, at 4.
292. Id.
293. The positioning of cable as the premium (fast) Internet option is demonstrated in Comcast's "Slowsky" advertising campaign. Bill and Karolyn Slowsky are turtles who are devoted to DSL because they feel "cable-modem service is just too fast."
294. See Linda Haugsted, Turtles that Win the Race: Comcast's 'Slowskys' Back Cable Modems Via TV Spots, Multichannel News, Jun. 22, 2006, available at http://www.multichannel.com/article/CA6336326.html.
295. Bernstein Research, Broadband Update, supra note 116, at 7.
296. Wireline Competition Bureau, Federal Communications Commission, supra note 175.
297. Bernstein Research, Broadband Update, supra note 116, at 7.
298. 2003 NetRatings Earnings Conference Call - Final, Fair Disclosure Wire, Feb. 26, 2004 [hereinafter NetRatings];
299. Carol Wilson, Nielson: Broadband Use Nears 75%, Prism Insight, Jun. 22, 2006 [hereinafter Nielson].
300. NetRatings, supra note 213;
301. Wilson, Nielson, supra note 213.
302. Internet users downloaded Skype 178,575,586 times by October 7, 2005. See http://www.skype.com/. Since its acquisition by eBay, Skype no longer posts the number of downloads on its website.
303. Skype, http://www.skype.com/ (last visited Aug. 21, 2006). When a subscriber is using Skype, the website indicates how many Skype subscribers are using the service at that moment.
304. Press Release, Skype, eBay to Acquire Skype (Sept. 12, 2005), http://about.skype.com/2005/09/ebay_to_acquire_skype.html.
305. Press Release, Skype, Free Calls to All Landline and Mobile Phones within the US and Canada (May 15, 2006), http://share.skype.com/sites/en/ 2006/05/freel_call_landlines_an.html.
306. See Apple, iPod+iTunes, http://www.apple.com/itunes/videos/ (last visited July 7, 2006).
307. Id.
308. Id.
309. Peter Cohen, Macworld Expo Live Keynote Coverage, Macworld.com, Jan. 10, 2006, available at http://www.macworld.com/news/2006/01/10/livekeynote/ index.php.
310. Akamai Technologies, Inc., Annual Report (Form 10-K), at 1 (Mar. 16, 2006) [hereinafter Akamai 2005 Annual Report].
311. Dan Frommer, Shifting Out of Neutral?, Forbes, Mar. 17, 2006, available at http://www.forbes.com/2006/03/16/ telcos-network-neutrality-cx_df_0317neutral_print.html.
312. Akamai 2005 Annaul Report, supra note 223, at 15.
313. Akamai Technologies, Our Customers, http://www.akamai.com/en/html/about/ customers.html (last visited July 7, 2006).
314. Tony Smith, Microsoft buys $15 Stake in Akamai, The Register.com, Sept. 28, 1999, http://www.theregister.co.uk/1999/09/28/ microsoft_buys_15m_stake/.
315. Frommer, supra note 224.
316. Keynote is a firm specializing in Internet speed measurement, with over 1,600 measurement computers in 144 locations worldwide. See Keynote, http://www.keynote.com/about_us/about_us_tpl.html (last visited July 7, 2006).
317. Alec Klein, Akamai Arranges Financing, Attracts Apple as Customer, Wall St. J., May 14, 1999, at B4.
318. Apple Webcast Appears to Break Speed Records, Newsbytes News Network, July 24, 2000.
319. Don Steinberg, Welcome to a Mad, Mad Multimedia World; There's More than One Way to Watch or Listen to a Game These Days, Phila. Inq., Oct. 18, 2005, at D1.
320. Alana Semuels, Tech Me Out to the Ballgame, Pittsburgh Post-Gazette, May 9, 2005, at E1.
321. Id.
322. Steinberg, supra note 231, at D1.
323. Hearing on Net Neutrality Before the S. Comm. on Commerce, Science, and Transportation, 109th Cong. (2006) (statement of Lawrence Lessig).
324. Vinton Cerf, representing Google, similarly asserted in prepared Senate testimony in Febuary 2006 that "consumers already have little to no choice of broadband providers." Id. (statement of Vinton G. Cerf).
325. In Canada, which has a market structure for broadband Internet access that closely resembles that of the United States, Professor Michael Geist has argued that "the lack of broadband competition and insufficient transparency" justify network neutrality regulation. See Michael Geist, Geist: Dangers in ISPs' Bid for New Tolls, Toronto Star, Dec. 19, 2005, available at http://www.thestar.com/NASApp/cs/ContentServer?pagename=thestar/Layout/ Article_Type1&c=Article&cid=1134946211708&call_pageid= 968350072197&col=969048863851.
326. Wu offers a hypothetical example of positive externalities that would be forgone if network operators banned IP "chat" programs. Tim Wu, Network Neutrality, Broadband Discrimination, 2 J. Telecomm. & High Tech. L. 141, 152. (2003).
327. Although Wu acknowledges that this hypothetical is merely a thought experiment, he does not explain why network operators would have incentives to block this kind of content in the first place. Wu argues that, if IP chat programs were blocked, existing consumers who value chat, as well as the creators of chat programs, would suffer economic harm. Id at 152.
328. Further, he argues, there would be negative externalities from the blocking, which would affect the marginal broadband subscribers who would not otherwise subcribes, the programs that rely on chat programs as middle-ware, and the social benefits of communicating through chat. Id at 152-53. It bears repeating, however, that these effects are purely hypothetical, as no network operator of which I am aware bans IP chat programs.
329. Letter by Timothy Wu & Lawrence Lessig, Ex Parte Submissions, CS Dkt. No. 02-52, Aug. 22 2003, at 3 [hereinafter Wu-Lessig 2003 Ex Parte Submission].
330. Id.
331. Id. at 4.
332. Id.
333. Barbara Van Schewick makes a similar argument in explicitly economic terms. See Barbara Van Schewick, Towards an Economic Framework for Network Neutrality, 5 J. Telecomm. & High Tech. L. (forthcoming 2007).
334. Van Schewick argues that the threat of discriminatory behavior by access providers would reduce the amount of innovation in the markets for applications, content, and portals. Id. at manuscript 40.
335. She concedes that discrimination by a network operator against unaffiliated content and applications would increase the network operator's incentive to engage in application-level innovation. Id.
336. Consequently, her analysis recognizes (in a manner that Lessig's and Wu's noneconomic argument does not) that there is a tradeoff between innovation in the network and innovation at the edges of the network. On balance, Van Schewick argues, this increased incentive to innovate in the network does not offset the decreased innovation by independent producers of content and applications, and that the result is a net reduction in application-level innovation. Id.
337. Lawrence Lessig, The Internet Under Siege, Foreign Pol'y, Nov.-Dec. 2001, at 56. Evidently, the Internet revolution ended sometime between January 1, 2001 and the publication of Lessig's article in Foreign Policy in November 2001, for he wrote in The Future of Ideas, which bears a 2001 copyright: All around us are the consequences of the most significant technological, and hence cultural, revolution in generations. This revolution has produced the most powerful and diverse spur to innovation of any in modern times. Yet a set of ideas about a central aspect of this prosperity - "property" - confuses us. This confusion is leading us to change the environment in ways that will change the prosperity. Believing we know what makes prosperity work, ignoring the nature of the actual prosperity all around, we change the rules within which the Internet revolution lives. These changes will end the revolution.
338. Lessig, The Future of Ideas, supra note 86 at 5 (emphasis added).
339. John Battelle, The Search: How Google and Its Rivals Rewrote the Rules of Business and Transformed Our Culture 1 (Portfolio Penguin Group 2005).
340. Id. at 7 (emphasis added).
341. Id. at 8.
342. Id.
343. Id.
344. Telecommunications Act of 1996, Pub. L. No. 104-104, pmbl., 110 Stat. 56. 56 (Telecommunications Act of 1996 was enacted to "promote competition and reduce regulation in order to secure lower prices and higher quality services for American telecommunications consumers and encourage the rapid development of new telecommunications technologies").
345. Robert W. Crandall, Competition and Chaos: U.S. Telecommunications Since the 1996 Telecom Act (Brookings Institution 2005).
346. Christopher Stern, The Coming Tug of War Over the Internet, Wash. Post, Jan. 22, 2006, at B1.
347. Tollbooths on the Internet Highway, N.Y. Times, Feb. 20, 2006, at B01.
348. Id.
349. Id.
350. Michael Powell, Chairman, Federal Communications Commission, Remarks at Silicon Flatirons Symposium: The Digital Broadband Migration: Toward a Regulatory Regime for the Internet Age (Feb. 8, 2004), http://hraunfoss.fcc.gov/edocs_public/attachmatch/DOC-243556A1.pdf [hereinafter Powell, Digital Broadband Migration].
351. David Sarasohn, Wyden Guards the Net, The Oregonian, June 25 2006, at F4.
352. In June 2006, Senator Wyden blocked a major telecommunications bill because it would not explicitly enforce network neutrality. Press Release, Office of Senator Ron Wyden, Wyden Blocks Telecom Legislation Over Ineffective Net Neutrality Provision (Jun. 28, 2006), available at http://wyden.senate.gov/media/2006/ 06282006_net_neutrality_holds_release.html.
353. Several weeks later, he threatened to filibuster any future telecommunications legislation that did not contain network neutrality regulation. Senate Floor Time for Telecom Bill Until Sept. - If Then, Comm. Daily, Jul. 17, 2006 (quoting Sen. Wyden as saying, "I'll do everything in my power to block this major communications legislation unless it ensures that net neutrality is preserved.").
354. Wu-Lessig 2003 Ex Parte Submission, supra note 237, at 4.
355. See Thomas W. Hazlett, Neutering the Net, Fin. Times, Mar. 20, 2006, available at http://news.ft.com/cms/s/ 392ad708-b837-11da-bfc5-0000779e2340.html.
356. Shankar Gupta, Google Takes MSN Rivalry to Washington, Online Media Daily, May 2, 2006.
357. Id.
358. Id.
359. Id.
360. Verizon Communications, Inc. v. FCC, 535 U.S. 467 (2002);
361. AT&T Corp. v. Iowa Utils. Bd., 525 U.S. 366 (1999).
362. See Chevron U.S.A., Inc. v. Natural Res. Def., 467 U.S. 837 (1984).
363. U.S. at 397.
364. Powell, Digital Broadband Migration, supra note 254.
365. Madison River Communications, L.L.C. and Affiliated Companies, Order, File No. EB-05-IH-0110, 20 F.C.C.R. 4295 (Enforcement Bureau, Mar. 3, 2005) [hereinafter Madison River Oder].
366. Madison River Communications, L.L.C. and Affiliated Companies, Consent Decree, File No. EB-05-IH-0110, 20 F.C.C.R. 4295 (Enforcement Bureau, Mar. 3, 2005) [hereinafter Madison River Consent Decree].
367. Madison River Order, supre note 266.
368. See OECD Network Neutrality Study, supra note 2, at 24.
369. See also Catherine Yang, At Stake: The Net as We Know It, Business Week Online Dec. 15, 2005 ("the Federal Communications Commission fined the comapny $15,000")
370. Philip J. Wieser, The Relationship of Antitrust and Regulation in a Deregulatory Era, 50 Antitrust Bull. 549, 571 (2005) (describing the FCC enforcement action as "requiring Madison River to enter into a consent decree that, among other things, fined the company for its actions").
371. Madison River Communications, About Us, http://www.madisonriver.net/ about_us/companies.php (last visited July 8, 2006).
372. Id.
373. Id. The parent company is Madison River Telephone Company, LLC.
374. Id.
375. Madison River Capital, LLC, Annual Report (Form 10-K), at 1 (mar. 23, 2005).
376. Id.
377. In 2003, Madison River received 6.2% of its total revenue from universal service payments. Id.
378. In 2004, that share rose to 6.6%. Id.
379. For example, earlier in Chairman Powell's tenure, the Enforcement Bureau ruled that an exclamation uttered by U2 singer Bono during a live television broadcast was not, when taken in context, indecent speech in violation of 18 U.S.C. §1464. See Complaints Against Various Broadcast Licensees Regarding Their Airing of the "Golden Globe Awards" Program, Memorandum Opinion and Order, 18 F.C.C.R. 19,859, 19,861 ¶5 (2003) (decision by the Chief, Enforcement Bureau).
380. The full Commission reversed that ruling. See Complaints Against Various Broadcast Licensees Regarding Their Airing of the "Golden Globe Awards" Program, Memorandum Opinion and Order, 19 F.C.C.R. 4975 (2004).
381. It reached a different result under the same legal standard, id. at 4978-80 ¶¶ 8-9, and also articulated and applied an additional theory of liability, which the Enforcement Bureau had not considered.
382. Id. at 4981 ¶¶ 13-14.
383. Press Release, FCC, Chairman Michael K. Powell Commends Swift Action to Protect Internet Voice Services, Doc-25715A (Mar. 3, 2005) [hereinafter Powell Press Release on Madison River].
384. Lawrence Lessig, Voice-Over-IP's Unlikely Hero: On his way out, Michael Powell defends four fundamental freedoms of the Net, Wired, Issue 13.05 (May 2005), available at http://www.wired.com/wired/archive/13.05/ view.html?pg=4.
385. See Paul Kapustka, FCC Fines N. Car. Provider $15K for Blocking Vonage: Madison River Agrees to Pay Fine for Blocking VoIP Service, Networking Pipeline, Mar. 3, 2005, available at http://www.networkingpipeline.com/60405195 (quoting Jeffrey Citron, CEO, Vonage).
386. SBC Communications Inc. and AT&T Corp. Applications for Approval of Transfer of Control, Memorandum Opinion and Order, WC Dkt. No. 05-65, 20 F.C.C.R. 18,290, 18,366 n.415 (2005) (summarizing comments of Vonage)
387. Verizon Communications Inc. and MCI, Inc. Applications for Approval of Transfer of Control, Memorandum Opinion and Order, WC Dkt. No. 05-75, 20 F.C.C.R. 18,433, 18,508 n.412 (2005) (summarizing comments of New York Attorney General). As the Commission used identical language to summarize arguments made by two different parties in two different mergers, the agency was clearly giving its own description of Madison River, including the fact that Vonage was the VoIP provider.
388. Vonage's website lists numerous press releases on or shortly after March 3, 2005, but none of them concerns blockage of VoIP. See Vonage, Press Releases, http://pr.vonage.com/ releases.cfm?Year=&ReleasesType=&DisplayPage=11 (last visited July 16, 2006).
389. Vonage's press releases on legislative and regulatory matters also have no mention in or around March 2005 of the Madison River case or of VoIP blockage generally. See Vonage, Press Releases, http://pr.vonage.com/releases.cfm?Year=&ReleasesType=Legislative/ Regulatory&DisplayPage=2 (last visited July 16, 2006).
390. At one point, Vonage reprinted a news story of the Madison River decision on its website. Vonage, http://www.getvonage.net/corporate/ press_news.php?PR=2005_03_03-0. Sometime between February and July of 2006, however, the link ceased to work.
391. Vonage Holdings Corp., Registration Statement (Amendment No. 8 to Form S-1), at 17 (May 24, 2006).
392. Memorandum re Blocking of Vonage's Service by Madison River to Christopher D. Libertelli & David H. Solomon (FCC) from William B. Wilhelm, Jr., Russell M. Blau, Ky E. Kirby & Michael C. Sloan (Swidler Berlin LLP), Feb. 9, 2005 [hereinafter Vonage Complaint].
393. Id. at 1.
394. Madison River Consent Decree, 20 F.C.C.R. at 4298 ¶10 (emphasis added).
395. Id. at 4298 ¶16.
396. Madison River Order, 20 F.C.C.R. at 4295 ¶1
397. (citing 47 U.S.C. 201(b)).
398. Powell Press Release on Madison River, supra note 277.
399. See Kapustka, supra note 279.
400. Amy Schatz & Anne Marie Squeo, Neutral Ground: As Web Providers' Clout Grows, Fears over Access Take Focus FCCs Ruling Fuels Debate between Broadband Firms and Producers of Content Blocking out Vonage Service, Wall St. J., Aug. 8, 2005, at A1;
401. Yang, supra note 269.
402. Schatz & Squeo, supra note 290, at A1.
403. See Madison River Communications, http://www.madisonriver.net/about_us/ locations.php (last visited July 16, 2006).
404. Yang, supra note 269 (emphasis added). Although this statement may be true in Mr. Herring's case in January 2005, Mediacom, the cable television competitor, was projected by Madison River in March 2006 to be able to offer its own VoIP service by mid-year.
405. See Madison River Communications, Lehman Brothers 2006 High Yield Bond and Syndicated Loan Conference, at slide 18, Mar. 16-17, 2006 (presentation of Paul Sunu, Chief Financial Officer, Madison River Communications), http://www.madisonriver.net/investor/presentations/ 2006.03.16.lehman.pdf.
406. Schatz & Squeo, supra note 290, at A1.
407. See also Weiser, supra note 269 (describing Madison River as a case of a "local telephony ... [having] blocked a voice-over-Internet provider's ability to deliver telephone calls over Madison River's DSL connections," although providing no factual support for that description). Vonage claimed that Mr. Herring "was unable to place outgoing Vonage calls and all incoming calls were routed to [redacted] Vonage voice mail service."
408. Vonage Complaint, supra note 283, at 7.
409. During the period of VoIP blocking, Mr. Herring continued to have a Madison River POTS line connected to his fax machine and could have used that line to make emergency 911 calls, if necessary. Id.
410. Madison River Communications Corp., Registration Statement (Amendment No. 3 to Form S-1), at 22 (Mar. 29, 2005).
411. Wu-Lessig 2003 Ex Parte Submission, supra note 237;
412. Tim Wu, Network Neutrality, Broadband Discrimination, supra note 236, at 151-52.
413. Wu-Lessig 2003 Ex Parte Submission, supra note 237, at 3.
414. Id. at 4.
415. Wu-Lessig 2003 Ex Parte Submission, supra note 237, at 4.
416. Letter by Ryan G. Wallach, Ex Parte Submission on behalf of Comcast Corp., CS Dkt. 02-52, May 15, 2003.
417. Id.
418. Wu-Lessig 2003 Ex Parte Submission, supra note 237, at 3.
419. Id. at 8.
420. Id.
421. Comcast Website, http://www.comcast.com/Benefits/CHSIDetails/ Slot5PageOne.asp.
422. Wu-Lessig 2003 Ex Parte Submission, supra note 237, at 8.
423. Comcast, Terms of Service, http://www.comcast.net/terms/subscriber.jsp (Jan. 12, 2006).
424. Wu-Lessig 2003 Ex Parte Submission, supra note 237, at 8.
425. Comcast and Linksys Make Sharing a High-Speed Internet Connection Easier New Comcast Home Networking Package Includes Linksys Cable Gateway For Connecting the Entire Household to the Internet, PR Newswire, May 3, 2004.
426. Wu-Lessig 2003 Ex Parte Submission, supra note 237, at 8.
427. Comcast, Terms of Service, http://www.comcast.net/terms/subscriber.jsp (Jan. 12, 2006).
428. Wu-Lessig 2003 Ex Parte Submission, supra note 237, at 8.
429. Comcast Home Networking, http://homenetworking.comcast.net/overview.asp (last visited July 8, 2006).
430. Wu-Lessig 2003 Ex Parte Submission, supra note 237, at 8.
431. Comments of the High Tech Broadband Coalition, Ex Parte Submissions, CS Dkt. No. 96-45, June 17, 2002.
432. Wu-Lessig 2003 Ex Parte Submission, supra note 237, at 8
433. (citing Cox Communications, Inc. Response to High Tech Broadband Coalition Allegations of January 28, 2003, Ex Parte Submission, CS Dkt. No. 02-52, Apr. 7, 2003, at 1).
434. Id.
435. Hearing on Net Neutrality Before the S. Comm. on Commerce, Science, and Transportation, 109th Cong. (2006) (statement of Lawrence Lessig) [hereinafter Lessig 2006 Senate Testimony].
436. See, e.g., Hal R. Varian, Microeconomic Analysis 98-99 (W.W. Norton 3d ed. 1992).
437. Lessig 2006 Senate Testimony, supra note 319.
438. Id.
439. See AEI Events, Key Issues in Telecommunications, May 10, 2006, video available at http://www.aei.org/events/eventID.1307,filter.all/ event_detail.asp.
440. Hearing on The Government's Role in Promoting the Future of Telecommunications Industry and Broadband Deployment Before the S. Comm. on Commerce, Science, and Transportation, 108th Cong. (2002) (statement of Lawrence Lessig) [hereinafter Lessig 2002 Senate Testimony].
441. Kevin J. Delaney, Unsung Player Key to Matching Google, AOL, Wall St. J., Dec. 20, 2005, at B1.
442. Catherine Holohan, AOL Casts Its Fate with Ads, Business Week Online, Aug. 3, 2006, available at http://www.businessweek.com/print/technology/ content/aug2006/tc20060803_622074.htm.
443. Richard Waters, Ad Trends See Ebay and Yahoo Join Forces, Fin. Times, May 26, 2006.
444. Id.
445. Id.
446. Google, AdSense, http://www.google.com/services/adsense_tour/ (last visited July 8, 2006).
447. Yahoo, Publisher Network, http://publisher.yahoo.com/ (last visited June 8, 2006).
448. See, e.g., Barbara Van Schewick, Towards an Economic Framework for Network Neutrality, 5 J. Telecom. & High Tech. L. (forthcoming 2007), at 29.
449. Id.
450. Van Schewick cites the price of new equipment, such as DSL modems, as an
451. However, DSL modems are typically included free of charge for new DSL customers. See, e-g., Verizon website, DSL Packages and Pricing, http://www22.verizon.com/forhomedsl/channels/dsl/packages/ default.asp?sourceID=vyw&promotion_code-480/Y80,%20480/Y80 (showing that a standard DSL modem is included with monthly service fees and a combined modem/wireless router is included at no extra charge with the premium service).
452. Roy Mark, Consumers Choosing DSL Over Cable, Internet News Bureau, Feb. 2, 2001.
453. Margo DeBoer, The Communications Bundle: The Time is Now, Yankee Group Report, Mar. 2006.
454. Margo DeBoer, Bundles Improve Customer Satisfaction Ratings for Local Telephone and Cable Companies, Yankee Group Decision Note Survey Analysis, Jan. 10, 2006.
455. Steve Donohue & Matt Stump, Ops Say: Stress VOD, Not PVRs, Multichannel Newswire, Mar. 15, 2004.
456. Annual Assessment of the Status of Competition in the Market for the Delivery of Video Programming, CS Dkt. No. 01-129, 17 F.C.C.R. 1244, 1326 ¶208 (2002).
457. DeBoer, Bundles Improve Customer Satisfaction, supra note 336.
458. Customer discounts from bundling strategies did not represent insignificant price decreases for service providers. Discounts offered by broadband Internet service providers were questioned as unprofitable strategies by many market analysts. Alan Breznick, Cablevision Scores with Optimum Triple-Play Bundle, Cable Digital News, Jan. 1, 2005.
459. Bundling strategies were an investment in lower churn rates by service providers because customers choosing bundled services have lower churn rates. For example, in 2004 Cox Cable reported 50 percent lower churn rates for triple-play customers than for customers subscribing to a single service. Steve Donohue & Matt Stump, Ops Say: Stress VOD, Not PVRs, Multichannel Newswire, Mar. 15, 2004.
460. Deboer, The Communications Bundle, supra note 335.
461. Id.
462. Id.
463. DeBoer, Bundles Improve Customer Satisfaction, supra note 336.
464. Wu, Network Neutrality, Broadband Discrimination, supra note 236, at 158.
465. Hearing on "Net Neutrality" Before the S. Comm. on Commerce, Science & Transportation, 109th Cong. (2006) (statement of Kyle McSlarrow, President & CEO, National Cable & Telecommunications Ass'n) ("NCTA's members have not, and will not, block the ability of their high speed Internet service customers to access any lawful content, application, or services available over the public Internet.").
466. Nat'l Cable & Telecommunications Ass'n, About Us, http://www.ncta.com/ContentView.aspx?contentId=2930 (last visited July 8, 2006).
467. United States Telecom Association, Carrier Members, http://www.ustelecom.org/index.php?urh=home.join+ ustelecom.carrier_members (last visited July 8, 2006).
468. Communications Opportunity, Promotion, and Enhancement Act of 2006: Hearing on H.R.5252 Before the H. Energy & Commerce Subcomm. on Telecommunications and the Internet, 109th Cong. (2006) (statement of Walter B. McCormick, Jr., President & CEO, United States Telecom Association).
469. SBC Communications Inc. and AT&T Corp. Applications for Approval of Transfer of Control, Memorandum Opinion and Order, WC Dkt. No. 05-65, 20 F.C.C.R. 18,290, 18,366 n.415 (2005);
470. Verizon Communications Inc. and MCI, Inc. Applications for Approval of Transfer of Control, Memorandum Opinion and Order, WC Dkt. No. 05-75, 20 F.C.C.R. 18,433 (2005).
471. Id. at Appendix G.
472. Federal Communications Commission, Statement of Broadband Policy, http://www.fcc.gov/broadband (Sept. 30, 2005).
473. Madison River Order, supra note 266.
474. Martin Discusses Net Neutrality, TechLawJournal.com, Feb. 8, 2006, available at http://www.techlawjournal.com/topstories/2006/20060208.asp.
475. Id. (stating that the FCC "acted in the past when people were blocking internet access over broadband pipes, and the Commission has already said that broadband pipes by telecommunications companies are the same as cable companies").
476. Id. (stating that the FCC "had never determined that clearly one way or another. We clarified the DSL order, but I don't think that the Commission had ordered that they were under the previous common carrier regime. I think that was still an open question. I think that that was the point of our original notice.").
477. Lessig 2006 Senate Testimony, supra 319 ("Those principles were relied upon by the FCC when it stopped DSL provider Madison River Communications from blocking Voice-over-IP services. That enforcement action sent a clear message to network providers that the Internet that they could offer must continue to respect the innovation-promoting design of end-to-end.").
478. Letter from FTC Commissioner Deborah Majoras to House Committee on the Judiciary (Apr. 14, 2006), at 1, available at http://www.house.gov/ judiciary_democrats/responses/ftcbroadbandnetresp41406.pdf ("The FTC is committed to maintaining competition and to protecting consumers from deceptive or unfair acts or practices relating to products and services within its jurisdiction, including non-common carrier Internet-related services.") [hereinafter Majoras Letter].
479. Id. at 2.
480. Id. at 7.
481. Cases in which the FTC has participated that featured Internet access prominently include: America Online, Inc. and CompuServe Interactive Services, Inc., Dkt C-4105 (2004);
482. WebTV Networks, Inc., Dkt. C-3988 (2000);
483. AOL, Inc., Dkt. C-3787 (1998);
484. and CompuServe, Inc., Dkt. C-3789 (1998).
485. Majoras Letter, supra note 357, at 3-4.
486. Ken Fisher, Google to Congress: We will not tolerate net abuse, ArsTechnica.com, July 4, 2006, http://arstechnica.com/news.ars/post/ 20060704.
487. MoveOn.org 2003 I.R.S. Form 990, at 10, available at http://www.guidestar.org/FinDocuments/2003/061/553/ 2003-061553389-1-9.pdf.
488. Id.
489. Glen Justice, George Soros Gives, And Republicans React with Fury, N.Y. Times, Nov. 16, 2003, at 2 ("Mr. Soros ... pledged $2.5 million to match contributions collected by the MoveOn.org Voter Fund, an organization raising money to run television ads against Mr. Bush.").
490. Glen Justice & Eric Lichtblau, Windfall for Anti-Kerry Veterans' Group, with Texan Among Those Giving Most, N.Y. Times, Sept. 11, 2004, at 13 ("Swift Boat Veterans for Truth, an advocacy group that jolted the presidential race with commercials questioning Senator John Kerry's military service, said it had raised $6.7 million in a windfall brought about by the group's high profile in recent weeks.").
491. See Statement by Admiral Roy Hoffmann, founder of Swift Vets and POWs for Truth, http://www.swiftvets.com/article.php?story=20041103104739220) (last visited Aug. 4, 2006).
492. The longest streaming video listed on the website of the Swift Boat Veterans for Truth lasts 2 hours, 1 minute, and 17 seconds. See http://horse.he.net/~swiftpow/index.php?topic=Ads (last visited Aug. 4, 2006).
493. Although many of the other streaming videos listed run from only one to eight minutes, some last roughly 24 to 30 minutes. Id.
494. Although the website no longer accepts online contributions, these streaming videos can still be downloaded for viewing. See https://www.swiftvets.com/swift/ccdonation.php?op=donate&site= SwiftVets (last visited Aug. 4, 2006).
495. Applications of Adelphia Communications Corporation, Comcast Corporation, and Time Warner Cable Inc., For Authority to Assign and or Transfer Control of Various Licenses, Petition to Deny of Free Press, Center for Creative Voices in Media, Office of Communication of the United Church of Christ, Inc., U.S. Public Interest Research Group, Center for Digital Democracy, CCTV, Center for Media & Democracy, Media Alliance, National Hispanic Media Coalition, the Benton Foundation, and Reclaim the Media, MB Dkt. No. 05-192, at 30, July 21, 2005 [hereinafter MAP Petition].
496. Id.
497. Id. at 45.
498. Id.
499. See Wu-Lessig 2003 Ex Parte Submission, supra note 237, at 13.
500. Lessig and Wu would permit blocking of content to "[p]revent Broadband users from interfering with other Broadband or Internet Users' use of their Internet connections, including but not limited to neutral limits on bandwidth usage, limits on mass transmission of unsolicited email, and limits on the distribution of computer viruses, worms, and limits on denial-of service-or other attacks on others." Id.
501. MAP Petition, supra note 367, at 45.
502. U.S.C. §527.
503. Section 527 exempts "political organizations" from federal income tax and gift tax. Id. §527(a).
504. "political organization" is defined as "a party, committee, association, fund, or other organization (whether or not incorporated) organized and operated primarily for the purpose of directly or indirectly accepting contributions or making expenditures, or both, for an exempt function." Id. §527(c)(1).
505. An "exempt function" is "the function of influencing, or attempting to influence the selection, nomination, election, or appointment of any individual to any Federal, State, or local public office or office in a political organization, or the election of Presidential or Vice-Presidential electors, whether or not such individual or electors are selected, nominated, elected, or appointed." Id. §527(c)(2).
506. id. §527(e)(2)
507. MoveOn.org Civic Action is a section 501(c)(3) organization that "primarily focuses on nonpartisan education and advocacy on important national issues." See http://www.moveon.org/.
508. MoveOn.org Political Action is a separate entity, not identified as a section 501(c)(3) organization, but instead described as "a federal political committee which primarily helps members elect candidates who reflect our values through a variety of activities aimed at influencing the outcome of the next election." Id.
509. In other words, it is a political action committee (PAC). See http://www.moveon.org/about.html#political.
510. Telus Cuts Subscriber Access to Pro-Union Website, CBC News, July 24, 2005.
511. Id.
512. Press Release, Telus, Alberta Court Grants Interim Injunction against Posting Telus Employee Photos (July 28, 2005), http://about.telus.com/cgi-bin/media_news_viewer.cgi?news_id= 605&mode-2&news_keywords=website (quoting Janet Yale, spokesperson for Telus).
513. Id.
514. Id.
515. Jeff Chester, The Shackles of the Net, The Nation, Feb. 2, 2006.
516. AESop, The Dog in the Manger, Aesop's Fables 1 (Grosset & Dunlap 2000). "A dog looking for a quiet and comfortable place to take a nap jumped into the manger of the ox and lay there on the hay. Some time later the ox, returning hungry from his day's work, entered his stall and found the dog in his manger. The dog, in a rage because he had been awakened from his nap, stood up and barked and snapped whenever the ox came near his hay. The ox is a patient beast, but finally he protested: 'Dog, if you wanted to eat my dinner I would have no objection. However, you will neither eat it yourself nor let me enjoy it, which strikes me as a very churlish way to act.' Moral: Some begrudge others what they cannot enjoy themselves."
517. Id.
518. Economists have suggested a theory of envy. See Baumol, supra note 64;
519. Hal R. Varian, Distributive Justice, Welfare Economics, and the Theory of Justice, 4 J. Phil. & Pub. Affairs 223 (1975).
520. See also Edward E. Zajac, Political Economy of Fairness 97-99 (MIT Press 1995) (surveying economic literature on fairness theory and envy).
521. However, Schadenfreude is different. Roughly speaking, economists define fairness as an allocation of resources for which envy is absent from all persons in the economy. In contrast, Schadenfreude implies that one person derives positive utility from another person's disutility: "the malicious enjoyment of the misfortunes of others." Oxford English Dictionary (2nd ed. 1989).
522. See also John Portmann, When Bad Things Happen to Other People 18 (Routledge 2000) (distinguishing Schadenfreude from envy on philosophical grounds).
523. Thus, Schopenhauer wrote: "Envy, although it is a reprehensible feeling, still admits of some excuse, and is, in general, a very human quality; whereas the delight in mischief [Schadenfreude] is diabolical, and its taunts are the laughter of hell." 2 Arthur Schopenhauer, Parerga and Paralipomena ch. VIII (On Ethics) §114 (1851) (T. Bailey Saunders, translator).
524. Leslie Walker, Akamai Strives for Safer, Speedier Web, Wash. Post, Sept. 30, 2004, at E01.
525. Akamai Technologies, Inc., Annual Report (FORM 10-K), at 37 (Mar. 16, 2006).
526. Id. at 3.
527. Id. at 6.
528. Id. at 3.
529. Press Release, Akamai, Akamai Reports Second Quarter 2006 Results (Jul. 26, 2006), available at http://www.akamai.com/en/html/about/press/ press578.html.
530. Lessig & McChesney, supra note 4, at A23.
531. Reardon, supra note 114.
532. id.
533. See Vonage, Vonage Basics, http://www.vonage.com (last visited July 8, 2006).
534. See Reardon, supra note 114.
535. Hearing on Net Neutrality Before the S. Comm. on Commerce, Science, and Transportation, 109th Cong. 6 (2006) (statement of Vinton G. Cert) ("Broadband capacity is not nearly as constrained as the network owners would have us believe. Some applications, such as voice over IP, take up very little bandwidth.").
536. Reardon, supra note 114.
537. Id.
538. Reardon, supra note 114.
539. Ron Orol, House Net-Neutrality Vote Nears, The Deal, Jun. 7, 2006.
540. Jerry A. Hausman & Jeffrey K. MacKie-Mason, Price discrimination and patent policy, 19 RAND J. Econ. 253, 254 (1998).
541. Id. at 255
542. (citing Hal R. Varian, Price Discrimination and Social Welfare, 75 Am. Econ. Rev. 870 (1985)).
543. Id. at 254.
544. Id. at 255.
545. Id. at 258.
546. See, e.g., Harvey Rosen, Public Finance 333 (McGraw-Hill Irwin 7th ed. 2005).
547. See Crandall, Competition and Chaos, supra note 249, at 31-58.
548. See Dennis W. Carlton & Jeffrey M. Perloff, Modern Indutrial Organization 141 (Pearson 4th ed. 2005) ("[S]urprisingly, these [MFN] clauses could be associated with high cartel prices rather than the low ones they seem to guarantee.").
549. Joshua Chaffin & Jonathan Birchall, Amazon Strikes Hollywood Deal, Fin. Times, Jul. 27, 2006.
550. Abbey Klaassen & Matthew Creamer, Amazon Readies Launch of Ad-Free Video Download Service, Advertising Age, Jul. 23, 2006.
551. Amazon's Movie Download To Launch in August: Report, Reuters, Jul. 24, 2006.
552. Richard Siklos, Amazon Considering Downloads, N.Y. Times, Mar. 10, 2006, at 1.
553. See Stephen J. Farr, Carol H. Tremblay & Victor J. Tremblay, The Welfare Effects of Advertising Restrictions in the U.S. Cigarette Industry, 18 Rev. Indus. Org. 147, 147-60 (2001);
554. E. Woodrow Eckard, Jr., Competition and the Cigarette TV Advertising Ban, 29 Econ. Inquiry 119 (1991);
555. J. Harold Mulherin & Mark Mitchell, Finessing the Political System: The Cigarette Advertising Ban, 54 S. Econ. J. 855, 855-62 (1988);
556. Roger H. Porter, The Impact of Government Policy on the U.S. Cigarette Industry, in Empirical Approaches to Consumer Protection Economics 447 (Pauline M. Ippolito & David T. Scheffman eds, 1986).
557. See Richard A. Posner, Antitrust Law: An Economic Perspective 145 (Univ. of Chicago Press 1977).
558. See, e.g., Carl Shapiro, Theories of Oligopoly Behavior, in 1 Handbook of Industrial Organization (Richard Schmalensee & Robert D. Willig, eds. North-Holland 1989).
559. See Stephen J. Farr, Carol H. Tremblay & Victor J. Tremblay, The Welfare Effects of Advertising Restrictions in the US. Cigarette Industry, 18 Rev. Indus. Org. 147, 147-60 (2001);
560. E. Woodrow Eckard, Jr, Competition and the Cigarette TV Advertising Ban, 29 Econ. Inquiry 119 (1991);
561. J. Harold Mulherin & Mark Mitchell, Finessing the Political System: The Cigarette Advertising Ban, 54 S. Econ. J. 855, 855-62 (1988);
562. Roger H. Porter, The Impact of Government Policy on the US. Cigarette Industry, in Empirical Approaches to Consumer Protection Economics 447 (Pauline M. Ippolito & David T. Scheffman eds, 1986).
563. Tamara Gignac, Shaw Sued by US. Rival over TV Ad, Calgary Herald, Mar. 21, 2006, available at http://www.canada.com/topics/technology/ story.html?id-157c5ff7-8194-4c6c87e0-496dc1b9a891&k-58144
564. Press Release, Vonage Canada, Who Controls How You Use Your Internet Access? Vonage Canada Challenges Shaw "VoIP tax" (Mar. 7, 2006).
565. Id.
566. Press Release, Shaw Communications, Shaw Responds to Vonage Canada's Claims (Mar. 8, 2006), http://www.shaw.ca/NR/rdonlyres/ A19222AC-750B-42CC-AC99-136A5C2EA420/0/VonageMar8.pdf.
567. MoveOn.org Civic Action, Save the Internet, http://www.civic.moveon.org/ save_the_internet/(last visited Aug. 5, 2006) (emphasis added).
568. Communications Opportunity, Promotion and Enhancement Act of 2005: Hearing Before the Subcomm. on Telecomm. and the Internet of the H. Comm. on Energy & Commerce, 109th Cong. at 10 (Mar. 30, 2006) at 2 (statement of Paul Misener, Vice President for Global Public Policy, Amazon.com), http://energycommerce.house.gov/108/Hearings/ 03302006hearing1823/Misener.pdf.
569. See Jerry A. Hausman & Gregory K. Leonard, Efficiencies from the Consumer Viewpoint, 7 Geo. Mason L. Rev. 707 (1999).
570. J. Gregory Sidak, An Antitrust Rule for Software Integration, 18 Yale J. on Reg. 1, 15, 30-31, 45-46, 68-69 (2001) (discussing whether the consumer or the producer is the lower-cost integrator of software functionalities).
571. Cf. Robert W. Crandall & J. Gregory Sidak, Is Structural Separation of Incumbent Local Exchange Carriers Necessary for Competition?, 19 Yale J. on Reg. 335 (2002) (discussing efficiency losses in telecommunications networks from restrictions on vertical integration);
572. Howard A. Shelanski & J. Gregory Sidak, Antitrust Divestiture in Network Industries, 68 U. Chi. L. Rev. 1 (2001) (discussing efficiency losses in operating systems and applications software from restrictions on vertical integration).
573. For a discussion of entry barriers as a method to deny a multiproduct firm the opportunity to reduce costs with respect to the production of goods that would exhibit economics of scope, see David E.M. Sappington & J. Gregory Sidak, Competition Law for State-Owned Enterprises, 71 Antitrust L.J. 479 (2003).
574. See Reuters, Google Confirms It's Testing Wireless Service (Sept. 20, 2005), http://www.msnbc.msn.com/id/9406935/.
575. For detailed economic and legal analyses of the MFJ's line-of-business restrictions, See Paul W. MacAvoy, The Failure of Antitrust and Regulation to Establish Competition in Long-Distance Telephone Services 35-81, 175-200 (MIT Press & AEI Press 1996);
576. Sidak & Spulber, supra note 89, at 55-99;
577. Kellogg, Thorne & Huber, Supra note 94, at 291-342.
578. Jerry A. Hausman, Valuing the Effect of Regulation on New Services in Telecommunications, Brookings Papers on Econ. Activity: Microeconomics 1, 13-24 (1997).
579. For a review of the vast literature on transaction cost economics, See Oliver E. Williamson, The Mechanism of Governance (Oxford University Press 1996).
580. This literature, of course, descends from Ronald H. Coase, The Nature of the Firm, 4 Economica (N.S.) 386 (1937).
581. Affidavit of Oliver E. Williamson ¶¶ 6-7, United States v. Western Elec. Co., Civil Action No. 82-0192 (filed D.D.C. July 3, 1994) (emphasis in original) (filed on behalf of several regional Bell operating companies to accompany a motion to vacate the line-of-business restrictions in the Modification of Final Judgment).
582. See Victor P. Goldberg, Regulation and Administered Contracts, 7 Bell J. Econ. 426 (1976).
583. See Michael H. Riordan & David E.M. Sappington, Information, Incentives, and Organizational Mode, 102 Q.J. Econ. 243 (1987).
584. Daniel F. Spulber, Market Microstructure: Intermediaries and the Theory of the Firm 289-306 (Cambridge University Press 1999).
585. See Daniel F. Spulber & Christopher S. Yoo, Network Regulation: The Many Faces of Access, 1 J. Competition L. & Econ. 635 (2005).
586. John Markoff, Google Says It Has No Plans for National Wi-Fi Service, N.Y. Times, Aug. 15, 2006, at 7.
587. Id.
588. Id.
589. Id.
590. Minnie Ingersoll, Free Citywide WiFi in Mountain View, Official Google Blog, Aug. 16, 2006, available at http://googleblog.blogspot.com/2006/08/ free-citywide-wifi-in-mountain-view.html.
591. Markoff, supra note 432.
592. Press Release, City of San Francisco Department of Telecommunications and Information Service, San Francisco Concludes Evaluation of Proposals to Create Universal Affordable Wireless Broadband Network (Apr. 5, 2006), available at http://www.sfgov.org/site/ tech_connect_page.asp?id=38562.
593. Earthlink Municipal Networks and Google Proposal, San Francisco TechConnect Community Wireless Broadband Initiative, Public Version, at 15, http://www.sfgov.org/site/uploadedfiles/dtis/tech_connect/ EarthLink_SanFrancisco_RFP_200519_PUBLIC.pdf.
594. Id. at 20-21.
595. Id. at 22.
596. Id. at 58.
597. Id. at 22.
598. Id.
599. Id. at 51.
600. Id. at 82.
601. Larry Darby, Consumer Welfare, Capital Formation and Net Neutrality: Paying for Next Generation Broadband Networks, Working Paper, June 6, 2006.
602. Id. at 38.
603. Wireline Competition Bureau, Federal Communications Commission, supra note 175.
604. See, e.g., Hal Varian, The Demand for Bandwidth: Evidence from the INDEX Project, in Broadband: Should We Regulate High-Speed Internet Access? 57-83 (Robert W. Crandall & James Alleman, eds., AEI Brookings Joint Center for Regulatory Studies 2002) (estimating an elasticity of demand between -3.1 and -2.0);
605. Gerald R. Faulhaber & Christian Hogendorn, The Market Structure of Broadband Telecommunications, 47 J. Indus. Econ. 326 (2000) (estimating an elasticity of demand of - 1.533);
606. Robert W. Crandall, J. Gregory Sidak, & Hal J. Singer, The Empirical Case against Asymmetric Regulation of Broadband Internet Access, 17 Berkeley Tech. L.J. 954 (2002) (estimating an elasticity of demand of -1.2);
607. Austan Goolsbee, The Value of Broadband and the Deadweight Loss of Taxing New Technology, Working Paper, Jan. 2006 (estimating a demand elasticity between -3.07 and -2.44).
608. John Horrigan, Home Broadband Adoption 2006, Pew Internet and American Life Project, May 28, 2006, http://www.pewinternet.org/pdfs/ PIP_Broadband_trends2006.pdf, at i.
609. National Cable and Telecommunications Association, http://www.ncta.com/ ContentView.aspx?contentId=54 (last visited July 8, 2006);
610. United States Telecom Association, Telecom Statistics, http://www.ustelecom.org/index.php?urh=home.news.telecom_stats (Apr. 4, 2006)
611. Press Release, Cellular Telecommunications and Internet Association, Subscriber Growth Breaks Record Again (Apr. 6, 2006), http://www.ctia.org/news_media/press/body.cfm?record_id=1600.
612. The discussion in this section draws from Damien Geradin & J. Gregory Sidak, European and American Approaches to Antitrust Remedies and the Institutional Design of Regulation in Telecommunications, in 2 The Handbook of Telecommunications Economics 518 (Martin Cave, Sumit Kumar Majumdar & Ingo Vogelsang, eds. North-Holland 2006).
613. Articulation of the Type I/Type II error analysis in the context of antitrust or sector-specific regulatory policy is often credited to Paul L. Joskow & Alvin K. Klevorick, A Framework for Analyzing Predatory Pricing Policy, 89 Yale L.J. 213, 223 (1979).
614. Legal and economic scholars have since widely embraced the framework. See Richard A. Posner, Economic Analysis of Law 536 (6th ed. 2002);
615. MacAvoy, supra note 105, at 177-78;
616. Richard L. Schmalensee, On the Use of Economic Models in Antitrust: The ReaLemon Case, 127 U. Pa. L. Rev. 994, 1018-19 n.98 (1979);
617. Sidak, Debunking Predatory Innovation, supra note 85;
618. Frank H. Easterbrook, Predatory Strategies and Counterstrategies, 48 U. Chi. L. Rev. 1121, 1144-45 (1983);
619. Timothy J. Muris, The Federal Trade Commission and the Rule of Reason: In Defense of Massachusetts Board, 66 Antitrust L.J. 773, 775-77 (1998);
620. Steven C. Salop, Exclusionary Conduct, Effect on Consumers, and the Flawed Profit-Sacrifice Standard, 73 Antitrust L.J. 311, 314 (2006).
621. Here, as earlier, I use "cross subsidy" loosely. Strictly speaking, a cross subsidy requires the price of broadband access to fall below its average incremental cost (AIC). The Ramsey solution (which uses marginal cost rather than AIC) would not permit the price of any product to fall below its marginal cost. See Baumol & Sidak, supra note 8, at 36;
622. Gerald R. Faulbaber, Cross-Subsidy Analysis with More than Two Products, 1 J. Competition L. & Econ 441 (2005).
623. See Tom Evslin, Net Neutrality at Home: Distributed Citizen Journalism against Net Discrimination, Harvard Berkman Center for Internet and Society, Aug. 8, 2006, available at http://ia311543.us.archive.org/1/ items/tom_evslin_2006-08-08.mp3/tom_evslin_2006-08-08.mp3 (technology consultant suggesting a prioritization detection system).