Do High Call Termination Rates Deter Broadband Deployment?

Phoenix Center Policy Bulletin No. 22

9 Pages Posted: 19 Mar 2009

See all articles by Thomas Randolph Beard

Thomas Randolph Beard

Auburn University - Department of Economics

George S. Ford

Phoenix Center for Advanced Legal & Economic Public Policy Studies

Date Written: October 2008

Abstract

In this paper, we attempt to shed light on an important policy question: Does the current way by which providers compensate each other for the exchange of voice over Internet Protocol (VoIP), wireless, local, and long distance calls inhibit broadband deployment? This question is timely, as the Federal Communications Commission is presently considering a comprehensive intercarrier compensation reform proposal that would establish lower and more uniform rates for the transport and termination of all forms of traffic, regardless of point-of-origin and technology. Supporters of the proposal have argued that broadband deployment would be advanced if the FCC were to adopt this proposal, while detractors assert that broadband deployment would be demonstrably hurt. In this paper, we find evidence that compared to the current Byzantine intercarrier compensation system, a lower, more uniform compensation rate can promote and spur broadband deployment, especially in rural and less densely populated areas where current call termination rates are very high, by reducing arbitrage opportunities that distort investment decisions. As such, comprehensive intercarrier compensation reform would appear to make a significant contribution towards the development of a true national broadband strategy.

Keywords: broadband, intercarrier compensation, national broadband strategy, universal service

JEL Classification: K23, L13, L14, L51, L96, L98, O33, O38

Suggested Citation

Beard, Thomas Randolph and Ford, George S., Do High Call Termination Rates Deter Broadband Deployment? (October 2008). Phoenix Center Policy Bulletin No. 22. Available at SSRN: https://ssrn.com/abstract=1360955 or http://dx.doi.org/10.2139/ssrn.1360955

Thomas Randolph Beard

Auburn University - Department of Economics ( email )

415 W. Magnolia
Auburn, AL 36849-5242
United States

George S. Ford (Contact Author)

Phoenix Center for Advanced Legal & Economic Public Policy Studies ( email )

5335 Wisconsin Avenue, NW
Suite 440
Washington, DC 20015
United States

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