Overpriced Underpowered Broadband in the USOne of my pet peeves is the poor deal broadband customers in the US are offered relative to what they could get if they lived in some other market-oriented democratic country, such as France or South Korea. Thus I was quite interested to learn that the Berkman Center for Internet & Society at Harvard Law School today sumitted to the US Federal Communications Commission its final report on broadband deployment and usage both current and planned around the world.
The Berkman Center began work in July 2009 and had a draft of its report ready for public comment in October 2009. In the report's preface (pdf), Yochai Benkler, a professor of entrepreneurial legal studies at Harvard who served as the principal investigator, summarizes the changes that were made in response to comments. The preface sheds light on some of the more controversial issues relating to analysis of the efficiency of the US market for broadband services.
The body of the report is quite lengthy. Here I'll draw on the executive summary and introduction (pdf), to provide an overview of the report's main findings, which are:
- A multidimensional approach to benchmarking broadband availability and quality helps distinguish countries whose experience is exemplary from those whose experience indicates pitfalls to beware of.
- The United States is a middle-of-the-pack performer on most first-generation broadband measures, and a weak performer on prices for high and next-generation speeds. (see the graphic below.)
Comparison of broadband providers:
Best price for highest-speed offering
(Next Generation Connectivity: A Review of Broadband Internet Transitions and Policy from Around the World (pdf), p. 172)
- Transposing the experience of open access regulation from the first broadband transition to next generation connectivity occupies a central role in other nations' plans.
- The Berkman Center's "most surprising and significant finding": (1) Open access policies in other countries have sought to increase levels of competition by lowering entry barriers;1 (2) Other countries aim to use regulation of telecommunications inputs to improve the efficiency of competition in the consumer broadband market. (3) This emphasis on open access policies appears to be warranted by the evidence.
- Large, long-term government investments have played a role in some of the highest performing countries.
- In Europe, substantial effort has been devoted to delimiting when government investment, both national and municipal, is justified and will not risk crowding out private investment.
- Several countries engaged in a range of investments to support broadband demand, including extensive skills training, both in schools and for adults.
- Open access policy, in particular unbundling, played an important role in facilitating competitive entry in many of the countries observed. In many cases, where facilities-based alternatives are available [e.g., use of existing cable systems to provide broadband Internet access], open access-based entrants played an important catalytic role in the competitive market. In some cases competition introduced through open access drove investment and improvement in speeds, technological progression, reduced prices, or service innovations.
- An engaged regulator enforcing open access policy is more important than the formal adoption of the policy.
- Broadband providers are regulated as carriers, and their carriage function is regulated and treated separately from their retail service function.
- Access rules are now being applied to the next generation transition, particularly to fiber.
- The goal of achieving ubiquitous access has led regulators to accept increased vertical integration between mobile and fixed broadband providers. In some places this has also led to application of open access requirements to mobile broadband platforms.
- In the two earliest instances where functional separation was introduced [the UK and New Zealand], it had rapid effects on competitive entry, penetration, prices, and/or speeds.
- Functional separation is increasingly adopted or considered as a way of achieving open access into the next generation of broadband.
- Facilities-based competition usually complements, rather than substitutes for, access-based competition.
- Entrepreneurial competitors have tended to enter through bitstream and unbundling access.
- Unbundled access can also be used by incumbents from neighboring countries or regions to enter adjacent markets and introduce competition; in some cases they do so by acquiring initially entrepreneurial entrants.
- Where unbundling was formally available, but weakly implemented, competition was limited to facilities-based entrants, with weaker results.
- The anticipated high costs of next generation transition are pushing countries and companies to seek approaches to share costs, risks, and facilities, rather than focusing primarily on creating redundant facilities to assure facilities-based competition; they aim to mitigate the loss of facilities-based competition with a range of new models of open access and shared facilities, tailored to fiber.
1 "Open access" refers to such policies as unbundling the supplying of physical infrastructure from the supplying of Internet services, allowing competitors bitstream access, co-location requirements (e.g, requiring that competitors be allowed a physical presence in telephone company substations), wholesaling and/or "functional separation," i.e., separation of the unit in an Internet company that provides data carriage from the unit that provides retail services.