How Internet Success Will Lead to Broadband Failure

28 Pages Posted: 15 Feb 2012

See all articles by Martha Garcia-Murillo

Martha Garcia-Murillo

Syracuse University - School of Information Studies

Ian MacInnes

Syracuse University

Date Written: June 1, 1998

Abstract

This paper points out a flaw in the telephone companies’ strategy of becoming content providers for broadband services. They designed their broadband projects under the assumption that they would be able to control the network for services such as video-on-demand (VOD) and home shopping. However proprietary advantage does not result from the linkage between infrastructure and applications unless they can restrict access by competitors to their customers. The interaction of two events, the growth of the Internet and the removal of legal barriers to competition for local cable and telephony, has made this unlikely. Due to the commodity nature of transport provision and the inability to leverage infrastructure strengths in content provision, the risk-return trade-off for investment in the information infrastructure will be unattractive. Even if the free rider problem ensures that improvements will be made to the infrastructure, market forces are likely to result in a patchwork which will be costly on a per household basis. For this reason, governments should expect that free markets will provide a socially sub-optimal level of information infrastructure and may need to reconsider the issues of public funding and regulation

Keywords: Broadband, Interent, Regulation

JEL Classification: L50, L51, L96

Suggested Citation

Garcia-Murillo, Martha A. and MacInnes, Ian, How Internet Success Will Lead to Broadband Failure (June 1, 1998). Available at SSRN: https://ssrn.com/abstract=2005266 or http://dx.doi.org/10.2139/ssrn.2005266

Martha A. Garcia-Murillo (Contact Author)

Syracuse University - School of Information Studies ( email )

220 Hinds Hall
Syracuse, NY 13244
United States
(315) 443-1829 (Phone)
(315) 443-5806 (Fax)

Ian MacInnes

Syracuse University ( email )

900 S. Crouse Avenue
Syracuse, NY 13244-2130
United States

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