Internet "Net Neutrality" Regulation Debate Continues

Debate over whether to regulate Internet ServiceProviders has raged during consideration of "Net Neutrality" (NN) legislation now pending in both houses of Congress. According to the American Consumer Institute, consumers following the debate in the press and assorted blogs might conclude that the battle is between big corporate "haves" and an assortment of garage-dwelling startups.

The American Consumer Institute has collected and summarized public data indicating the relative financial size and power of the principal antagonists in the debate. The data shows that firms in the NN coalition are financially powerful, earn supracompetitive returns and have significant market power. Specifically, the data shows:

• Cable TV and Telco network providers (Comcast, Time Warner, AT&T, Verizon, et al.) have greater sales, but lower profit rates, market valuations, returns on
  invested capital and cash flow multiples than NN advocates (Google, Microsoft, Yahoo! and eBay).
• Measured by the market value of outstanding shares (market capitalization), Google and Microsoft are far larger than cable and Telco network providers.
• Net Newcomers Google (50.1%), Yahoo (27.1%), and Amazon (25.9%) enjoy monopoly-like returns on invested capital compared to AT&T (8.5%) and Verizon (8.7%).

In addition to superior financial strength, NN companies also enjoy significant market power reflected in large shares in relevant markets. Google dominates the "search" market, Microsoft dominates markets for software, and eBay dominates markets for online auctions, etc.

In the minds of informed consumers, the American Comsumer Institute data raises further questions about how consumer welfare is increased by imposing government price and service regulation on network infrastructure providers and not other web-centric companies with equal or superior market and financial power.