Regulating Vertical Integration in Broadband: Open Access versus Common Carriage

Broadband Internet involves two vertical relationships: the Internet Service Provider (ISP) requires both a physical conduit (e.g. telephone or cable television lines) and content. The ISP–conduit relationship has been subject to controversial unbundling regulation, but no such rules apply to the ISP–content relationship. We argue that regardless of whether ISPs are vertically integrated with conduits, they have incentives to create vertical restrictions on content. Foreclosure of ISPs by conduits may not increase and indeed could reduce these restrictions. Thus, telephone common carriage and Internet application neutrality may both be at odds with unbundling and “open access” policies.