Competition in Broadband Provision and Its Implications for Regulatory Policy
J. Gregory Sidak
Criterion Economics, L.L.C.
Hal J. Singer
October 1, 2003
This report examines mass-market broadband access and take-up, analyzing the current and prospective level of competition and drawing implications for public policy. The report was commissioned by The Brussels Round Table, a forum for leading European telecommunication operators and equipment manufacturers, including Alcatel, BT, Deutsche Telekom, Ericsson, France Telecom, Siemens, Telefonica de Espana, and Telecom Italia.
A distinction is drawn between 'facilities-based competition', where providers are using all (or some of) their own infrastructure, and 'access-based competition', where providers depend on access to someone else's network. Amongst EU Member States, there is a general consensus that infrastructure-based competition is desirable in telecommunications and has an important role in delivering innovations such as broadband. However, public statements from national regulatory authorities (NRAs) about the benefits of infrastructure competition have not always been matched by coherent regulatory policy designed to facilitate such competition. Broadband is a new service. Typically, new services are not subject to specific regulation, owing to the risk that this would discourage investment and stifle innovation. However, from its inception, the development of broadband access has been influenced by intervention from policy makers and regulators. This intervention includes local and national government initiatives to promote broadband, and ex-ante obligations on incumbent telecom operators to provide access to their networks.
While broadband penetration is widely portrayed as being disappointingly slow, penetration is actually quite fast relative to the adoption of comparable technologies - thus questioning the claim's use as a justification for public policy intervention. Given the prevalence of intervention to date, an equally valid response is to question the effectiveness of existing regulation. Both new entrants and incumbent operators are rational agents who inevitably respond to regulatory incentives; if broadband deployment in the EU has been too slow, regulatory policy is a key area where one should look for an explanation. The current approach of NRAs to broadband is heavily influenced by the existing regulatory framework for traditional telephony services, with its emphasis on access to the local loop. The appropriateness of this approach may be questioned, given that broadband is a new service that requires new infrastructure build (even if existing networks are used) and that it can and is delivered over many different types of platforms, including cable, satellite, fixed wireless and mobile.
Against this background, this report has a number of objectives: to highlight the extent to which there is currently competition between platforms in the provision of broadband access; to explore the potential for growth in platform competition (subject to a supportive policy environment) and likely market dynamics; to assess the relative effectiveness of platform competition and access-based entry in delivering benefits for customers and reducing the need for regulation; to assess the impact of public policy on incentives to invest in infrastructure and so on the future development of platform competition; and to develop conclusions about the appropriate public policy towards broadband.
The report's authors are Dan Maldoom and Richard Marsden of DotEcon, and Gregory Sidak and Hal Singer of Criterion Economics. The report was presented in Brussels on October 15, 2003 to the BRT conference "The Future of the European Telecommunications Industry," attended by member company CEOs, members of the European Parliament, Commissioner Erkki Liikanen, and other regulators from the European Commission.
Number of Pages in PDF File: 228
Keywords: telecommunications, regulation, broadband, international regulation
JEL Classification: A1, E61, H8, K2, K23, L5, L51, O3, O38working papers series
Date posted: December 17, 2003 ; Last revised: February 25, 2010
© 2014 Social Science Electronic Publishing, Inc. All Rights Reserved.
This page was processed by apollo2 in 0.438 seconds