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unless VCRs were banned. We wisely decided not to ban VCRs, and Hollywood is doing better

than ever. More recently, respected legal scholars argued as late as 1995 that no one would ever

put any valuable content on the Internet unless Congress passed special copyright protections for

Internet works. The amazing variety of useful material on the Internet today, despite Congress’

failure to give special perks to copyright owners, belies the argument. It may well be that cable

companies will provide broadband Internet access whether or not we give them special

incentives to do so. And if we are to grant such incentives, they certainly shouldn’t take the form

of the power to destroy a vibrant ISP market.

100.

Further, the speed of investment in broadband is not the only economic and social

value at stake. There is as well the environment for innovation which is affected by the

competitive environment of the Internet. If the cost of a faster deployment of broadband is a

reduction in that competitive environment, then it is not clear the benefit is worth the cost.

Again, the extraordinary returns that AT&T enjoyed before the 1984 consent decree may well

have sped its investment in its conception of what a communications network should be; it

doesn’t follow that there was a net benefit to society from that increased incentive to invest.

D.

Regulation as a Backstop

101.

As an alternative to its argument that the government should do nothing now, the

Bureau argues that if things turn out for the worse — if cable does in fact implement a closed

system as they say they intend, and if cable becomes an important aspect of the broadband

market — then the government can pursue open access to cable after the fact, through, one

presumes, antitrust litigation.

102.

This is an extraordinary argument. Whether one believes the government is

justified in its suit against Microsoft or not, one cannot avoid the conclusion that the existing

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systems for dealing with monopoly problems in the networked economy ex post are extremely

inefficient. Among the costs of using antitrust litigation to design markets are precisely the costs

of uncertainty that the Bureau discusses in relation to cable. To say there is no reason to use a

seatbelt because there is always the care of an emergency room is to miss the extraordinary costs

of any ex post remedy. There is little evidence that the government is in a position to intervene to

undo excess monopoly power in an efficient and expeditious manner.

103.

Moreover, the costs of dislodging an existing monopoly power are always

significant, and always higher ex post. This is particularly true in this context, where if we must

regulate ex post we will face integrated, bundled broadband providers that will have to be broken

up, and ways will have to be found to recreate the competition the FCC will have allowed to

languish.

V.

Conclusion: The Appropriate Presumptions in the Internet Context

104.

The Bureau is right about one important fact: We know very little about how this

market functions. Ten years ago, no one would have predicted how the network would matter to

the creation of the Internet; as late as 1995, Microsoft itself confessed it had missed the

significance of the Internet. We are faced in the Internet with a phenomenon we don’t fully

understand, but which has produced an extraordinary economic boom.

105.

In the face of such uncertainty, the question we should ask is what presumptions

should we make about how this market is functioning. In our view, these assumptions should

reflect the design principles of the Internet. The Internet has been the fastest growing network,

crucial to our economy, because it has enabled an extraordinarily innovative competition. It has

enabled this competition in part because of its design. It has been architected, through the End-

to-End design, to enable this competition.

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106.

This principle of the initial Internet should guide the government in evaluating

changes to the Internet’s architecture, or acquisitions that threaten to change this effective

architecture. The presumption should be against changes that would interfere with this End-to-

End design. The aim should be to keep the footprint of monopoly power as small as it can be, so

as to minimize the threats to innovation.

107.

These principles should guide the FCC in the context of mergers affecting

ownership of significant aspects of the Internet. If a merger threatens an architecture which is

inconsistent with the Internet’s basic design, and if that merger affects a significant portion of a

relevant Internet market, then the burden should be on the party making that merger to justify

this deviation from the Internet’s default design. The presumption should be against deviating

from these principles.

108.

As with any principle, these presumptions should apply unless there is clear

evidence that displacing them in a particular case would be benign. The burden should not be

upon those who would defend the existing design. The existing design has done quite enough to

defend itself. If there is good reason to allow AT&T to change the cable network into a version

of the old telephone network, then it should bear a heavy burden in justifying this return to past.

In our view, it has not come close to meeting that burden.