Competition Policy in Network Industries: An Introduction

Competition Policy and Antitrust and Networks, the Internet, and Cloud Computing

Article Snapshot

Author(s)

Nicholas Economides

Source

NET Institute Working Paper No. 04-24, 2004; NYU, Center for Law and Business Research Paper No. 03-10

Summary

This paper looks at how public policy should evolve to regulate network industries.

Policy Relevance

Network industries are the foundation of the new economy, and if we keep using old antitrust laws to regulate them, we’ll hinder growth.

Main Points

  • Network industries are different than “normal” industries because the value of their product to users increases if more people use the product.
    • Examples of network industries include: telecommunications, the Internet, television, airlines, credit cards, and ATMs. There can also be “virtual” networks—all VHS video players, or all computers running Windows .

  • Even a perfectly regulated marketplace of network industries may lead to monopolies or dominant firms – and that is not necessarily a bad thing. People benefit from belonging to larger networks.

  • The legal system does not yet have a framework for analyzing competition policy issues in network industries.

  • There needs to be a new benchmark developed, looking at how these firms control technical standards, bundle, price, and use their power in other markets. This needs to happen quickly, because network industries are the foundation of the new economy.

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