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Competition in Broadband Provision and Its Implications for Regulatory Policy

228 Pages Posted: 17 Dec 2003 Last revised: 25 Feb 2010

Dan Maldoom

DotEcon

Richard Marsden

DotEcon

J. Gregory Sidak

Criterion Economics, L.L.C.

Hal J. Singer

Economists Incorporated

Date Written: October 1, 2003

Abstract

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.

Keywords: telecommunications, regulation, broadband, international regulation

JEL Classification: A1, E61, H8, K2, K23, L5, L51, O3, O38

Suggested Citation

Maldoom, Dan and Marsden, Richard and Sidak, J. Gregory and Singer, Hal J., Competition in Broadband Provision and Its Implications for Regulatory Policy (October 1, 2003). Available at SSRN: https://ssrn.com/abstract=463041 or http://dx.doi.org/10.2139/ssrn.463041

Dan Maldoom

DotEcon ( email )

105 - 106 New Bond Street
London W1S 1DN UK
United Kingdom
+44 (0)20 7870 3800 (Phone)
+44 (0)20 7870 3811 (Fax)

Richard Marsden

DotEcon ( email )

105 - 106 New Bond Street
London W1S 1DN UK
United Kingdom

J. Gregory Sidak (Contact Author)

Criterion Economics, L.L.C. ( email )

1717 K Street, N.W.
Washington, DC 20006
United States
(202) 518-5121 (Phone)

HOME PAGE: http://www.criterioneconomics.com

Hal J. Singer

Economists Incorporated ( email )

2121 K Street N.W.
Suite 1100
Washington, DC 20037
United States
202-747-3520 (Phone)

HOME PAGE: http://www.ei.com/viewprofessional.php?id=71

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