Can the Free Market Provide Broadband for Everyone?
Submitted: July 1, 2009 - 5:14pm
Originally published: July 1, 2009
Last updated: July 1, 2009 - 5:15pm
Originally published: July 1, 2009
Last updated: July 1, 2009 - 5:15pm
Source:
New York Times
Author:
Stacey Higginbotham
[Commentary] Only 2 percent of the world lives in a country where broadband penetration has exceeded 80 percent, according to a report from TeleGeography. The report noted that worries over broadband saturation are really only appropriate in 10 countries out of the 127 the firm tracks, and the US isn't even one of those saturated markets. There are 36 countries where broadband providers serve less than 5 percent of the population. So while there's concern in the U.S. cable and telecommunications industries over growth in their fixed line businesses, what we really should be pondering is whether or not the low-hanging fruit of fixed-broadband access has been plucked, and if so, how do we get broadband to the rest of the world? The government can subsidize a wired infrastructure much like Australia's government is doing today with its $31 billion investment in fiber, or providers can focus on wireless if it's not cost-effective to build out wired broadband.
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Comments
Shouldn't we first ask whether the value consumers place on broadband exceeds its costs?
If, on one hand, it is demonstrated that unsupplied consumers do not value broadband at more than its costs, then surely there is no problem. It would not be sensible to use more in valuable resources to provide broadband to these people than they would gain from that provision. Instead, those resources could be used to provide other more highly valued things. As an example, not everyone buys a Wii exactly because they get less value from a Wii than the Wii costs at available prices. This is a sensible, indeed economically efficient, outcome that leads to no claims that those without Wiis should be given better access to them. Alternatively, some explanation must be provided as to why consumer valuations are incorrectly low, and what policy measure could address this without making things worse.
On the other hand, it may be demonstrated that consumers value broadband by more than it costs, but market forces neither offer, nor can be credibly expected to offer the service. In that as yet unmade out case, it would again have to be demonstrated that a proposed response to this problem would improve, rather than worsen the situation.