A thousand cuts and the last mile problem

[Commentary] At the heart of the problem with competition on the Internet and how this might impact on consumer choice is the ‘last mile problem.’

The issue is that there is a single ‘pipe’ running into dwellings and premises. To have more than one is not cost effective. And that ‘pipe’ will always be owned by someone and that someone will have monopoly access to the consumer as a result. So what are the options for the US to deal with the last mile?

• Regulated prices: it could adopt regulated pricing as in other countries and open up access.
• Privatization: the essential problem with the last mile is that there will always be a last mile because there is always a customer at the edge of a network. The problem at the moment is that the customer is a bottleneck and then the owner of the last mile to the customer is a second, sequential bottleneck. Essentially, the double monopoly problem is built into this structure.
• Municipal broadband: saving the customer owning the last mile, individual localities could set up their own networks to provide a second option against incumbent firms. This is the ‘thousand cuts approach.’ Basically, what we have in broadband is a number of monopolies equal to the number of customers (dwellings/premises). The fight is over each one individually. One approach would be for a large national competitor to emerge and do this everywhere. But what would make more economic sense is that there were local solutions based on local needs.