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Gurley on Cable Regulation: Counterintuitive Thinking

By - December 20, 2003

I subscribe to Bill Gurley’s Above the Crowd newsletter, and always find his insights worth the read. (Bill is a VC at Benchmark, and a former partner of mine on the Internet Summit conferences.) His latest missive, “Cleaning Up After the Ninth Circuit in an Attempt to Save the Internet” is an exercise in counter-intuitive thinking. When I first read about this decision, I thought it was a victory against the evil cable companies, who I am always willing to believe have nothing but their own monopolies at heart. The ruling said, in short, that cable lines had to be viewed as telecommunication services rather than information services. The distinction was important, as it meant the cable lines were subject to the same sharing rules as phone lines. In other words, it could open cable up to competition, similar to what the RBOCs already face.

Given that for three of the past four years SBC felt my neighborhood was not profitable enough to offer DSL, and I had to get it from Speakeasy, which offers service on top of SBC lines, I thought this kind of a ruling was a good idea – maybe there would finally be someone like Speakeasy who could offer me cable modem speeds and who had a clue about the internet (Comcast clearly does not – don’t get me started on that one).

Bill makes the case that while the intent of the court may have been good, the result could be crippling. I am not sure I agree with everything he writes – much of it is pretty rigid anti-regulation sentiment – but he makes some good points. Among them:

…Often in complex political systems, the objective of an action can be honorable, yet the impact of said action can be completely at odds with the objective. This is largely because the tools we use to encourage behavior in such systems are often crude and imprecise.

Attempting to increase competition by mandating that a company invest in infrastructure and then share that infrastructure with competitors is simply not a market-based solution. …

We should all know by now that rather than increasing competition, regulation typically reinforces monopolies and oligopolies. Startups will not and cannot prevail in heavily regulated industries. …

Bill concludes that either the Congress of the Supreme Court will have to clean up the Ninth’s mess.


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