Interesting reading about broadband on the editorial pages of the major US papers this weekend.
The Sunday NY Times had an OpEd penned by Yochai Benkler, principal author of the largely ignored Berkman Center comparative study of international broadband performance [as we wrote a few weeks ago, University of Calgary’s Dean of Business observed that the study was rebutted by economists with extensive practical experience of telecommunications regulation]. The FCC’s National Broadband Plan had only one footnote that referred to the Berkman Center’s report. Out of all the work done by the Harvard researchers, the only observation that appeared to merit a reference was:
Some international comparisons suggest the number of retail broadband providers may be positively correlated with advertised download speeds, at least at the high end of the market, and with affordability.
And the FCC quickly followed up with:
Others rank the United States high in affordability of broadband, despite the fact that 96% of consumers have two or fewer choices, and suggest that consumers may not be willing to pay as much for high speeds as they are for other functionality.
Since the FCC report had only one reference to the Berkman study, the OpEd tries to cut out the middleman – selling to the public what he could not get the FCC to buy into.
after eight years of intense litigation and lobbying from telephone companies, the Federal Communications Commission gave in, deciding that competition between one telephone incumbent and one cable incumbent was enough — in essence, it rejected open access as a way to create competition.
Benkler misses the point. Open access is used outside of North America because in most countries, there is nothing close to the nearly ubiquitous intermodal competition that we have in Canada and the US. This model of “open access” won’t create the benefits of increasing competition and investment when competition already exists.
No matter how many times we hear the populist mantra of a cable and telco “monopoly,” the vast majority of North Americans already have access to choice; multiple facilities-based choices enabled over twisted pair, coax, fibre, fixed and mobile wireless, satellite. Multiple service providers offer consumers choices over many of these facilities.
A recent paper by Catherine Middleton, Canada Research Chair – Communication Technologies in the Information Society at Ryerson University’s Ted Rogers School of Management, observes that Canada has about 500 internet service providers, less than 10% of which are incumbents. The paper discusses the problem with many open access models, with regulators manipulating the market:
It is therefore no surprise that despite being considered as a ‘‘second-best” alternative, unbundling policies have been implemented to introduce service-based competition into broadband markets in 29 of the 30 OECD markets.
However, paradoxically, service-based competition also bears the risk of actually deterring facilities-based competition and further innovation and investment in the existing single infrastructure: with the incumbent providing attractive access provisions (e.g. relatively low prices for unbundled loops), incentives for a new provider to roll out new infrastructure are diminished.
Also on Sunday, the Washington Post carried an editorial talking about the FCC’s National Broadband Plan as being “longer on aspiration than specific policy intentions.”
broadband networks have been built with billions of dollars from companies in the private sector with a legitimate right to extract profit from well-placed investments. These initiatives — and yes, the profit motive — have resulted in remarkable leaps in a few short years.
Broadband service is hardly a monopoly marketplace. And as the Post observed, “it is hard to see in this field the signs of gross market failure.”
Many of the “digirati” tweeted and provided links to the NY Times piece. Virtually none have linked to the Washington Post. Perhaps the Post’s message didn’t resonate as well with those arguing for increased regulation of the internet, but why are they afraid of sharing it with their disciples?
Mark, you can say many things about Benkler’s study, but I don’t see how you can possibly call it ‘largely ignored’. Disregarded by telcos, perhaps even the FCC itself, sure, but ‘largely ignored’ is being unfairly dismissive of a report that has attracted a great deal of attention, even on your own blog.
The Berkman report was commissioned by the FCC to serve as an input for the National Broadband Plan. That there is only one reference to it in the Plan led to my observation.
Ah, then we simply disagree over the semantics of the word ‘ignored’ – no matter.
You claim the market seems perfectly healthy in Canada, and provide a misleading statistic on the number of ISPs in Canada. We may very well have 500 ISPs, only 10% of which are incumbents. You fail to mention, however, that the incumbent TSPs and cable BDUs maintain a 94.5% market share in broadband penetration. This means the other 90% of ISPs are reliant on dial-up, or fight over the remaining 5.5% of the broadband market.
Given that dial-up is declining at an understandably accelerating rate, that the entire future of wholesale broadband is in doubt with the current stagnation of GAS, and that the clear market dominance of incumbents in the broadband market continues unabated, how can you maintain that the market for internet access in Canada is enjoying healthy levels of competition?
We all focus on and cite the sources that support our own opinions, and ignore the ones that do not. It’s human nature, I suppose. The beauty of disagreement is that it can force us to acknowledge evidence that does not support our opinions, and even occasionally forces us to modify them.