sense as a matter of economic policy to foreclose the largest possible market for ISP competition,
particularly when doing so serves no good end.
The Importance of Acting Now
As we describe more fully below, there are those within the FCC who have
expressed the view that there is no reason for the FCC to address the open access question in the
context of this merger. The merger itself will not change the bundling policy of the existing
AT&T Cable Services network. Thus any problem with open access, some would claim, is not
exacerbated by the merger.
This view misunderstands the potential for strategic action. If there are five
broadband cable networks, each acting independently, then the threat to innovation is less than if
these five broadband cable networks could act in unison. If they were independent, then the
decision of some networks to block certain kinds of Internet services would not necessarily
influence any other networks. Thus the threat to innovation would not be as great. Once the cable
monopolies can act together, however, and decision to discriminate would affect a larger section
of the market. The risk to innovation would therefore be much greater. Further, AT&T is
implementing its bundling policy now, and a firm stance in favor of open access by the FCC
could have a beneficial effect on AT&T’s policy, not only regarding MediaOne, but in other
The “wait and see” approach also discounts the cost of regulating ex post. In its
present state, the ISPs that AT&T would rely upon are independent business units. If the merger
were completed, they could easily be folded into the resulting entity. Once integrated, the
13Further, if bundling of broadband service is permitted for every network except those based on classic telephone
wires, eventually xDSL providers will have a strong moral case that they should not be subject to a restriction that
regulatory costs of identifying non-discriminatory rates would be much higher than they would
be under the existing structure. Rather than the complexity that DSL regulation involves,
imposing a rule of open access now would be relatively less costly. The same is even more true
of independent ISPs. If the vibrant market for ISPs in narrowband access is weakened or
destroyed because they cannot provide broadband service, those ISPs and their innovative
contributions will disappear. If they do, we won’t magically get competition back by deciding
later to open the broadband market to competition.
A Comparison to United States v. Microsoft1 4
To see the significance of the threat in the context of broadband, it is useful to
compare the nature of the bundle at issue in this merger with the threat that the government has
alleged in United States v. Microsoftthat Microsoft poses. Obviously the two cases are different
in many ways. Microsoft’s operating system is far more dominant than is cable broadband
service. But the point of the comparison is not to equate the competitive threat of the two
services. It is to see the structural equivalence between the threats.
The government’s primary claim against Microsoft is a charge of monopoly
maintenance. The argument is that Microsoft bundled its browser with its operating system, so as
to foreclose effective competition in the browser market, and thereby protect its monopoly
returns in the operating system market. The threat that the government claims Microsoft was
avoiding was the development of a robust application platform, built around Java technologies.
As the browser was the platform within which such applications could develop, it was important,
the government argues, to keep control of the browser market.
does not burden any of their competitors.
The issues in United States v. Microsoftare extremely complex. No fair
consideration of the real issues in the case could conclude that either side has an easy argument.
But what is clear is that the behavior alleged against Microsoft is far less controlling than the tie
In this matter too, the claim of those supporting open access is that
AT&T/MediaOne would be in a position to maintain monopoly power, at least over the video
market. Like the Microsoft case, this maintenance would be affected by keeping control over the
source of potential competition. In the Microsoft case, that was the browser; in this case, that is
But importantly, the level of control exercised by AT&T in this case is far greater
than the control Microsoft is alleged to assert. The government has never argued that Microsoft
totally disabled the ability of competing browsers to be installed on client machines; the most the
government alleged was that Microsoft made it difficult, or uneconomical, to load a competing
browser. Once properly installed, a competitor browser on the Windows platform works just as
well as Microsoft’s. Or more precisely, the government has not alleged that the platform disables
In the case of cable broadband, however, the architecture does disable the relevant
competition. One simply cannot choose a competitor ISP as the primary ISP in the cable
broadband architecture, and thus one cannot choose a competitor to provide the primary ISP
14 We note that Lessig served as special master in a prior proceeding between the United States and Microsoft, and
Lemley has served as a consultant to the Antitrust Division of the United States Department of Justice on the current
case. It is not our attention to offer here any opinion on the merits of either case.