Can we rely on competition to deliver broadband?
Rob Atkinson, Information Technology and Innovation Foundation
TWashington consensus in favor of more broadband competition ignores the fact that broadband displays natural monopoly or duopoly characteristics. Because of the nature of the broadband industry, there are significant tradeoffs between more competition and goals of efficiency, innovation, low prices, and higher speeds and broader deployment. Thus, it’s a mistake for policymakers to assume that if they simply “push the competition lever,” all the problems with broadband policy will be solved. Some problems will recede, but others are likely to emerge. The bottom line is that if policymakers want to maximize not only societal welfare but also consumer welfare, they must balance the push for more competition with the need to maintain and create an efficient broadband industry structure.
This paper starts by reviewing the affordability of broadband in the United States. It then postulates two starkly different views toward broadband competition: the “engineers’ view” and the “economists’ view.” Finally, it reviews the four main policy options toward broadband competition: 1) keep the same number of “pipes”; 2) spur the deployment of more pipes; 3) force incumbents to open up existing pipes to competitors, and 4) regulate “duopoly” pipes. Although each policy track will achieve some benefits, each also brings with it costs and risks. Policymakers need to balance the desire for more competition to enhance consumer welfare in the broadband realm with the need for the most efficient broadband industry structure.