Fair Competition and Internet Access

Content availability is one of the major concerns of companies. Marketing a product or providing consumer resources requires a constant stream of information to be disseminated through every available media outlet. One of the fastest growing and most leveraged is the Internet. The benefit of the Internet is the tremendous global reach that it has in the world’s marketplace. The difficulty with the Internet is fierce competition. During the early years of growth, some companies sought to control the Internet marketplace through software market share, but now telecommunications companies and Internet service providers are attempting to monopolize control of the bandwidth and access in the United States.
In his text, Spinello presents several cases to illustrate the issues surrounding fair competition and Internet access. He points out that “[t]he presence of network effects, therefore, tends to bias industries toward a monopoly structure”? (2003, pg. 200). In case 8.2, Spinello questions the ethics of Microsoft bundling Windows Media Player and MSN Messenger with its released Windows XP operating system. Based on the precedent of Microsoft’s previous business practices with regard to bundling its Internet Explorer web browser with the operating system to “compete”? with Netscape among other dubious moves, it would appear that Microsoft was continuing its trend of anti-competitive behavior.

However, at the time of release, MSN Messenger was not the dominant messaging client in the market — AOL Instant Messenger was and still is today. In addition, Windows Media Player was not the default player of choice as it had strong competition from Real Networks’ Real Player and Apple’s Quicktime Player, and the Internet had not standardized on any one streaming media format. Spinello is assuming that the dominant market share of the operating system would allow Microsoft to overtake the messaging and media player markets as well.

Over time, this has proven not to be the case, which proves that consumers still have the ultimate control over which product will rise to the top. Apple, Inc. released their iTunes media player in 2001 and has taken the lion’s share of the media player market, and AOL still retains the title as messaging king with its Instant Messenger software, despite a wide variety of competitors in the marketplace. A note should also be made that Microsoft is not the only operating system maker who provide additional software packages with their OS releases. Apple is guilty of the same strategy with more impact upon the market than Microsoft.

The iLife suite of applications that comes free with Apple computers provides consumers with a photo editing and management application, a web site design application, an audio and music editing and production application, a DVD authoring application, and a digital video editing application. While these applications are well-programmed and high quality, the availability of them for free with a new computer purchase prevents third party application developers from making headway into the competitive software market. While there are better applications for each of the tasks that the iLife applications accomplish, Apple still retains a large majority of the market share due to this practice of including the software as part of the operating system “package”?.

The United States needs to address these anti-competitive practices in the market as a whole rather than just simply waiting until a monopoly has grown out of these behaviors. As things currently stand, policy essentially turns a blind eye to anti-competitive behavior until a corporation becomes a dominating behemoth. AOL is a behemoth that grew from the early years of the Internet into the struggling corporation that it is today. In case 8.3, Spinello discusses the benefits and risks of the AOL Time Warner merger. One of the issues that arose during the merger examination was whether regulators should “require AOL Time Warner to open its cable system to rival ISPs”? (2003, pg. 224).

Internet service providers in the United States are quite competitive, but the amount of options to choose from is still relatively small within the local markets. Unlike telecommunications services, Internet service is not truly treated as a public service or utility in all regions. Consequently, the availability and quality of offerings varies greatly. Johna Johnson opposes a federal broadband policy that would enable people in all regions of the country to have access to high-speed Internet. She points out alternatives such as satellite and city funded wireless access and states, “[l]et the taxpayers in those cities decide what services they want to provide — without federal interference. If citizens want to tax themselves to pay for universal broadband, more power to them. Just keep Big Brother out of it”? (2006, pg. 30).

Keeping the government uninvolved in providing broadband access across the nation may be what is best for the United States, but without their help, most areas just languish in their attempts to provide high-speed access to everyone. Many European nations offer their residents broadband access at much higher data speeds for a fraction of the cost when compared to American ISPs. Europe is not the only nation with better Internet infrastructure either. Australia, New Zealand and China have higher quality and better-priced offerings than the United States.

Cable companies held a lead in the broadband access market for a short while. Then, offerings such as satellite and DSL appeared to provide consumers with alternatives for high speed Internet access. The problem is that the ISPs set their pricing structure to follow their traditional offerings prices — cable television and telephone service. “The fact is, the average cable bill has risen 86 percent in the past ten years, according to the FCC”? (Stone, 2006, A6). Along with the rise in price of television service, the broadband Internet service has risen as well. The same goes for the price of DSL service and telephone service.

While telecommunications prices rise, so to do the other offerings from the telecommunications providers, Internet service being chief among them. Why does this happen? Because of the monopolies and duopolies of telecommunications providers in the United States. There simply are not enough choices for home telephone, cable television, and Internet service in most areas of the United States. Passmore explains,

> “For many years in the U.S., telecommunications networks were considered a ‘natural monopoly,’ and as a result, the Bell System was operated as a regulated monopoly, and it enjoyed exclusive rights to provide telecom services. It didn’t seem to make sense at the time for anyone to build competing networks, for either long-haul or local communications”? (2006, pg. 16).

To alleviate the monopoly over control of the data lines available and access to them, some different approaches are being tested. One such solution is the “two-tiered model”?. Under this model, the “government controlled networks deliver basic IP (Layer 3) transport services only… [T]his network can only be used to deliver wholesale services to multiple retail service providers… This creates a competitive market for retail providers”? (Passmore, 2006, pg. 17). By putting the government in control of the overarching network, net neutrality becomes a non-issue. or does it?

The issue of net neutrality has arisen as some Internet service providers have begun practices such as “traffic shaping”? and “rate limiting”?. Traffic shaping involves examining the data packets that are traveling through the ISPs lines and assigning a priority to those packets based upon the protocols and applications they are related to. Rate limiting involves blocking or slowing transfer of packets that are targeted at specific ports and protocols, such as file sharing or voice over IP. Companies such as Verizon will deteriorate the quality of service given to VOIP packets in order to prevent competitors to their phone service — Vonage and Sunrocket — from gaining an advantage in the marketplace. Passmore points out that “rather than being accountable to regulators, operators now answer to their stockholders, who naturally expect ever-growing revenues and profits”? (2006, pg. 12).

Customers of ISPs have grown outraged with quality of service degradation and what appear to be unfair business practices that not only hurt the competitors in the market, but also the consumer. Consumers want to have more options available to them at affordable rates, especially in the United States. Gone are the days of “Ma Bell”?. People are more connected than ever before, and the increasing cost of staying connected is causing consumers to re-evaluate the services being offered.

The two-tiered solution would not only increase competition, but would also make the Internet more accessible. In a Consumer Reports article, the observation is made that “the cost of Internet access — dial-up and especially broadband — is the main obstacle to connectivity”? (2005, pg. 61). Households with low-income, minorities, elderly, disabled, amongst other social groups, are being shut out by the cost of access. Consumer Reports further informs “[m]ore than 80% of households with incomes above $50,000 a year have [internet access], but less than half earning under $30,000 a year do”? (pg. 61).

The United States has high Internet access prices because the cable and phone companies hold control over the networks. With tiered pricing schemes and lower quality access models (for the same previous prices) showing up, it is apparent the these companies are not looking to increase availability any time soon and are leveraging the monopoly and duopoly freedoms allowed them to increase their revenue to the detriment of American consumers.

One would think that utilitarianism would apply to public utilities, however, this is not currently the case with regard to Internet access in most of the United States. “As long as the conventional monopoly model of regulation remains in place, it risks increasing harm to the incentives of incumbents and new entrants alike to invest and compete in ways that benefit American consumers”? (Shelanski, 2007, pg. 105). Government control over the wholesale networks would guarantee a fair pricing structure for retail Internet service providers and would allow for a robust range of service offerings to better address the needs of many more Americans.

Additionally, with appropriate allocation of tax payer revenue, infrastructure could be expanded to reach areas of the United States which previously had no offerings and would likely not obtain services of the like unless population density dictated a corporate capital investment. Of course, the question that arises then is can the government be trusted with control of the wholesale network and would it remain unbiased despite lobbying by the powerful and wealthy service provider networks?


  • Anonymous. (2005). Market competition would increase Web access. Consumer Reports, 70(2), 61.
  • Johnson, J. T. (2006). Let competition bring broadband to boonies. Network World, 23(15), 30.
  • Passmore, D. (2006). Combating the two-tiered Internet. Business Communications Review, 36(2), 12-13.
  • Passmore, D. (2006). Truly neutral nets. Business Communications Review, 36(9), 16-17.
  • Shelanski, H. (2007). Adjusting regulation to competition: Toward a new model for U.S. telecommunications policy. Yale Journal on Regulation, 24(1), 55-105.
  • Spinello, R. (2003). Case Studies in Information Technology Ethics, Second Edition. Upper Saddle River, NJ: Prentice Hall.
  • Stone, A. (2006). When competition knocks, you’ll know what to do. Los Angeles Sentinel, 72(5), A6.