It appears that a new branch has forked off from the “hipster” neo-Brandeisian approach toward regulation, which styles itself as the study of “networks, platforms, and utilities” (NPU). Beginning with the 2022 publication of the “Networks, Platforms, and Utilities: Law and Policy” casebook by Morgan Ricks, Ganesh Sitaraman, Shelley Welton, and Lev Menand, NPU has been pitched as a counter-movement to the law & economics framework for public policy.
NPU proponents argue that sectors like energy, transportation, finance, and digital platforms “bear a family resemblance” with “overlapping and crisscrossing similarities,” in that they share a common “infrastructural” nature that, NPU contends, requires unified, utility-style regulation. They advocate policies that prioritize universal access and nondiscrimination over economic efficiency and consumer welfare.
When subjected to microeconomic analysis, NPU’s grouping of these disparate sectors into a single field of inquiry is a category error. The approach relies on superficial functional similarities—that these services are all “essential”—while ignoring the radical divergence of their underlying economic characteristics.
This post explores why NPU should not be considered a distinct field of inquiry and demonstrates that existing economic frameworks already provide the necessary tools for effective policy interventions.
Economic Heterogeneity: The Taxonomy of Error
Retired U.S. Supreme Court Justice Stephen Breyer noted that the effectiveness of any regulatory regime depends critically on:
- The existence of a market failure; and
- A match between the nature of the market failure and the chosen regulatory tool.
His concept of regulatory mismatch highlights the danger of applying regulatory tools when a market failure does not exist or when the tools do not align with the market realities they aim to address.
For example, under Breyer’s approach, applying traditional forms of regulation to digital platforms would likely be ineffective or harmful because of regulatory mismatch. Traditional access regulation assumes high fixed costs, natural-monopoly conditions, and static market boundaries—features rarely present in digital markets. Indeed, digital platforms are characterized by low barriers to entry, rapid innovation, and complex multisided dynamics. Applying traditional regulatory paradigms to these markets risks inefficiency, reduced innovation, and unintended harm to consumers.
Effective regulation requires a precise taxonomy of market failure, as regulation is warranted only where there is rigorous evidence of a defect that markets cannot resolve efficiently. We regulate utilities not because they are important, but because they exhibit specific cost characteristics that make competition unstable or inefficient.
The NPU categorization—encompassing physical utilities like water and electricity, transportation networks like rail and pipelines, and digital platforms like search engines and social media—fails this test due to profound differences in cost structure, rivalry, and barriers to entry.
Natural Monopoly vs Elastic Capacity
The traditional public utility is defined by natural monopoly due to subadditive costs. Subadditive costs occur when the total cost of producing a good or service is less when a single firm produces the entire output, as compared to the sum of the costs if multiple firms were to produce smaller portions of the same output.
This is a supply-side phenomenon. One firm can establish the infrastructure—laying a water pipe or local electric grid—at a lower total cost than two firms duplicating the effort. The capital is sunk, making exit barriers high. These physical networks also manage rivalrous goods: the water I use to shower cannot be used by my neighbor to flush his toilet.
Digital platforms exhibit a fundamentally different cost structure. While they have high fixed costs for research and development and coding, their marginal costs are often close to zero. The capacity constraints of digital platforms are elastic. My use of a search engine does not impede your use—the service is non-rivalrous. While the water from my tap is the same as the water from my neighbors’, my internet search history is likely to be quite different. Regulating a zero-marginal-cost, differentiated, and dynamic industry using statutes designed for a high-fixed-cost, homogeneous, and static industry would produce regulatory mismatch.
The Flawed Analogy to Common Carriage
NPU proponents will argue that platforms must be treated as common carriers, with the concomitant obligations of nondiscrimination and equal access. This concept was historically applied to those who sold transport (e.g., a ferry carrying goods from one side of a river to the other) or managed rivalrous resources (e.g., an innkeeper who provided lodging).
Digital platforms, however, do not sell transport. In August 2025, an Ohio court ruled on a motion for summary judgment that Google was not a common carrier because it does not transport property for others; instead, it is internet service providers who are responsible for transporting requested data, not Google. Google offers individualized results in response to search queries. Someone in my neighborhood searching for “restaurants near me” will get different results than the same search performed across town or in another state.
Moreover, a social-media platform’s core value is its algorithm’s ability to select, rank, and filter content. Mandating nondiscrimination for a content platform would compel the platform to carry everything, including spam or harmful content, which creates a negative externality for other users. Prohibiting discrimination would prevent platforms from addressing this externality and destroy the service’s value proposition. Applying common-carrier logic here misunderstands the platform’s function.
Network Effects Are Demand Side, Not Supply Side
Network effects are a demand-side phenomenon. They arise when the utility a user derives from a product increases with the number of other people who use that same product. Communication systems provide examples: my ability to make phone calls is useful only if others also have phone service.
NPU proponents use the term “networks” in a broader sense, often referring to physical infrastructures characterized by links and nodes. But this characterization is too broad, because it classifies as “networks” many services that are not natural monopolies and do not exhibit network effects. For example, mass transit is a network in which pickup/dropoff nodes are linked by the transit routes. But mass transit is not a natural monopoly; in many cities, several competing services can profitably operate in the same geographic area. In addition, mass transit does not exhibit network effects, in that my utility from using mass transit does not improve with an increase in the number of other mass transit users. In fact, because of crowding and delays, it may actually decrease.
Put simply, a network as defined by NPU may not actually exhibit network effects. More importantly, the existence of network effects alone does not constitute a natural monopoly.
Natural monopoly is based on supply-side efficiency, stemming from subadditive costs. Network effects merely create a tendency toward concentration or a winner-take-most dynamic, but they do not necessarily preclude competition.
Economic theory demonstrates that, if costs are not subadditive, multiple networks can coexist. This is widely observed in the digital economy. Uber and Lyft coexist in ridesharing. Instagram, TikTok, and Snapchat coexist in social media, as do Facebook, X/Twitter, and LinkedIn. Google, Bing, and DuckDuckGo coexist in internet search, while generative-AI services like ChatGPT, Anthropic, and Perplexity also provide search functionality.
Multi-homing occurs when users switch among platforms at minimal or zero cost, drastically weakening the competitive advantage of network effects. In a true natural monopoly like a water-pipe connection, multi-homing is impossible. By contrast, many consumers have numerous social-media accounts that they regularly use, often in multiple tabs on the same device.
Classifying a platform with network effects as an immutable utility ignores the dynamic competitive pressures and rapid pace of innovation that can quickly displace market leaders. MySpace held a dominant position in social networking before Facebook displaced it. Yahoo dominated search before Google displaced it. Regulatory approaches premised on static assessments of market power risk applying obligations to platforms whose market dominance may be merely transient.
Dynamic Efficiency vs Regulatory Stagnation
The modern digital economy is driven by dynamic efficiency, with its focus on innovation, R&D investment, and technological change over time. Firms often seek the temporary monopoly position that Joseph Schumpeter identified as the prize for innovation. NPU-style regulation, with its emphasis on static tools like rate-of-return regulation, poses a risk to this system.
Harvey Averch and Leland Johnson identified perverse incentives in rate-of-return regulation. If a firm is guaranteed a return on its capital investment, it has an incentive to overinvest in capital to inflate the rate base and thus increase its absolute profit. This leads to inefficiency, or “gold plating.” Empirical studies have found evidence of this Averch-Johnson effect in electric utilities, which built excess generating capacity during the period of cost-of-service regulation.
If a regulator caps profits or forces a firm to share its technology immediately after the firm achieves success, the incentive to invest billions in risky R&D diminishes. As the Supreme Court noted in Verizon Communications Inc. v. Law Offices of Curtis V. Trinko, forcing a successful firm to share its infrastructure “lessen[s] the incentive for the monopolist, the rival, or both to invest in those economically beneficial facilities.”
Competition, where viable, is more adaptive and tends to generate better outcomes than centralized regulation, which suffers from information problems and institutional limitations.
The Existing Law & Economics Toolkit
The specific issues that NPU claims to address—market power, access, and pricing—are already the core subjects of established law & economics frameworks designed to address sector-specific complexities.
Natural Monopoly and Access
Public-utility economics provides formal models to analyze natural-monopoly conditions, utilizing tools such as price theory and cost-of-service ratemaking.
William Baumol developed the theory of subadditivity, specifying precisely when costs are subadditive and when a single firm is most efficient. Harold Demsetz argued that, even if a market is a natural monopoly, competition for the right to serve the market through franchise bidding can constrain prices without the need for ongoing rate regulation.
The framework for evaluating mandated access, including tests for durable market power and demonstrated failure of private negotiation, is derived from law & economics analysis of utilities and competition-law precedents.
Competition and Dominance
Antitrust law handles competitive failures by prohibiting anticompetitive conduct, collusion, and harmful mergers.
Concerns such as vertical integration, self-preferencing, and foreclosure of rivals that NPU raises as governance problems are directly addressed through existing antitrust doctrines, including the rule of reason, which weighs anticompetitive harms against procompetitive justifications.
Structural remedies, such as divestiture, and behavioral remedies, like nondiscrimination mandates, are already implemented as antitrust solutions, as seen in landmark cases involving Standard Oil and Microsoft.
Governance of Dynamic Markets
Modern competition economics, drawing on industrial organization, analyzes complex scenarios such as multisided markets. Jean Tirole received the Nobel Prize in Economics in 2014 partly for his work on two-sided markets.
Simple neutrality mandates fail in these settings because efficient pricing often requires cross-subsidies, such as zero price for users subsidized by advertisers.
Conclusion: A Call for Regulatory Precision
The NPU paradigm is a pedagogical rebranding intended to unify disparate regulatory history under a common banner of “infrastructure.” By abandoning economic precision, the approach risks applying public-utility regulation to sectors that require more targeted tools and measures.
To accept NPU as a distinct field of inquiry is to accept that “infrastructure” suspends the normal requirements of economic analysis. The law and economics approach provides a disciplined, evidence-based approach that ensures interventions are targeted and reversible. Regulation must focus on observable, economically salient criteria—such as cost structure, demand characteristics, network topology, and the magnitude of market failure—not on vague concepts like “NPU-ness.”
The path forward requires continued refinement of already-available tools—such as antitrust enforcement tailored to network dynamics and competition law for specific misconduct, like foreclosing rivals. When regulation is necessary to address structural barriers that prevent private ordering, it must avoid the “mismatch” Breyer warned of and be justified by demonstrating that the benefits clearly exceed both direct costs and the harm to innovation.
Regulatory success is achieved through specialized analysis and a commitment to competitive principles, not by creating a unified, overgeneralized regulatory domain.
