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  1. #1
    This is a post I’ve been meaning to write for a while. With wireless industry regulation an increasingly regular topic of discussion on both Verge podcasts and Nilay’s recent article on carriers being a threat to innovation, it seemed like it’s finally time that I put this into words.
    On the Verge podcasts they regularly refer to their support of increased carrier regulation as "socialist" or pro "big government". This is usually done tongue in cheek, but I think that it feeds into a general polarization of the topic that I often see in discussions about the issue. That is, people (especially those working for the wireless industry’s interests) often frame the issue as a contest between those in favor of big government vs. those in favor of a free and open market. A lot of us, perhaps intuitively, recognize that the issue isn’t that simple. However, I rarely see or hear someone articulate why opposing wireless net neutrality should not be considered favoring the free market.

  2. #2

    Wireless regulation is not about Free Market vs. Big Government (an economic perspective)

    So that’s what I’d like to do here, lay out the reasons why the current state of the US wireless industry is not a free and competitive market and explain how that leads to inefficient outcomes for us as consumers.

  3. #3
    First, let’s review what exactly a free market looks like and what makes it something that we should want the wireless industry to aspire to. After all, we don’t want free markets just because they make a good sound bite. We want them because they lead to efficient use of limited resources. In a free market producers willingly sell a product at a price above their cost of production, and consumers willingly buy a product at a price below what they would ultimately value it at. Since both parties gain from the transaction and neither has been coerced into it, wealth is created simply through exchange. Efficiency and innovation are encouraged in producers though the profit mechanism, and efficient use of the product is encouraged in consumers through increased consumer surplus (the difference between what you pay for an item and what you would ultimately value it at).

  4. #4
    But markets aren’t perfect, and there are a number of ways in which a market can fail and lead to inefficient outcomes. The one most everyone is familiar with are monopolies, where a producer exercises their exclusive control over a product to restrict supply and extort larger prices from consumers than they would otherwise bear. For a more compressive list of potential market failures, I would recommend reading this article. In particular, I believe the US wireless industry is currently guilty of three market failures which lead to inefficient, or at the very least less efficient than it should be, use of our wireless resources.

  5. #5
    content from reference site

  6. #6
    I wanted to leave this one for last, but almost all of the other problems with the current carrier situation stem from this market failure. Simply put, no matter how much money, resources, technical expertise, and innovative ideas you have, you simply cannot create a nationwide wireless carrier to compete with big four in the US. This is because in order to do so you would need to lease wireless spectrum from the US federal government, spectrum that the US government is not selling right now.

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