[Chapter-delegates] information asymmetry

[Joly MacFie]

Apropos recent dialog on the Chapter-delegates list about Net Neutrality vs.
Open-Internetworking, below - from Farber's IP list, and prompted by recent
revelations that an ISP has been hijacking its client's Google queries - is
a comment re-inforcing the notion that, while NN is debatably valid or
achievable, transparency and disclosure are more appropriate avenues for
immediate concern - and possible FTC clarification/regulation.

The concept of "information asymmetry" is a solid addition to the
conversation.

j



Begin forwarded message:

*From:* Gerry Faulhaber <gerry-faulhaber at mchsi.com>
*Date:* April 12, 2010 10:37:08 AM EDT
*To:* <dave at farber.net>dave at farber.net
*Subject:* *Enabling Markets (re: "Hijacking")*

Dave [for IP, if you wish]--

Should a firm engage in deception of some sort (whether this alleged
redirection/"hijacking" rises to the level of fraud is another issue), they
are taking advantage of a well-known market failure: information asymmetry,
in which the producer knows quite a bit more about its product/service than
the customer does, and may use that additional knowledge for nefarious
purposes.  Consumer protection laws, lemon laws, the Federal Trade
Commission, Health Dept restaurant inspectors, FDA regulations, all are
government interventions designed to solve or alleviate this information
asymmetry, which only in special circumstances will the market itself
correct.  There are often other solutions to information asymmetry problems
(certifying private agencies, such as Good Housekeeping, JD Powers, for
example), but sometimes government intervention to ensure transparency and
disclosure is required to assure the proper workings of the competitive
market.

Dave Farber and I have come out very forcefully in our two recent papers in
favor of transparency and disclosure not only in the broadband ISP market
but in all Internet markets (yes, including application and content
providers), if necessary by gov't regulation.  We are believers in the power
of markets, but fully understand that intervention may be necessary in the
event of a market failure such as information asymmetry.

FYI, the two papers are "Innovation in the Wireless Ecosystem",
<http://ijoc.org/ojs/index.php/ijoc/article/view/670/388>
http://ijoc.org/ojs/index.php/ijoc/article/view/670/388 and "The Open
Internet" <http://ijoc.org/ojs/index.php/ijoc/article/view/727/411>
http://ijoc.org/ojs/index.php/ijoc/article/view/727/411, both published in
the International Journal of Communications, and submitted as Comments to
the FCC in related proceedings.




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