Governing the 'New Economy': Internet Service Provider Market in the UK

The firms that have entered the Internet Service Provider (ISP) market in the United Kingdom are providing a key technological platform for the growth of the new economy information-intensive services. The market performance of firms in this sector is important because these ISPs are offering access to services that are seen as essential for expected productivity improvements associated with the so-called new economy. The growth of demand for Internet access and related services diruing the 1990s has raised a host of new issues for policy and regulation of this nascent market. The rhetoric of ISPs and related companies is that free entry and open competition without government intervention is in the public interest because it is consistent with promoting growth and price competition. However, various forms of governance including rules on interconnection, investment, and ownership are shaping the extent of entry and the competitive potential of the market. Where market co-ordination is not being achieved through publicly instituted rules (eg interconnection), private sector governance initiatives are emerging. These include the consolidation of assets through merger and acquisition to form oligopolistic ownership structures. These developments are inconsistent with the rhetoric of free entry and open competition. This research will develop an improved understanding of the implications of oligopoly in a network industry. It will examine what may constitute an entry barrier in this emergent industry based on an empirical analysis of market, policy and technological dynamics. This work will identify the financial, corporate and technological competency linkages that are being forged in the ISP sector. This will provide the basis for assessing the significance of new forms of entry barriers as well as the extent to which these have the potential to give rise to the exercise of market power that may be antithetical to the public interest