The Positive Effects of Unbundling on Broadband Deployment

Abstract

This POLICY PAPER examines whether there is a relationship between regulated rates for "unbundled local loops" and deployment of broadband technology by incumbents and entrants. Using an econometric model that analyzes 2002 and 2003 local loop rates and takes into account price variability and other factors that may impact broadband deployment, this POLICY PAPER finds that unbundled loop prices based on Total Element Long Run Incremental Cost ("TELRIC") are associated with increased availability of broadband services and increased availability of competitive broadband services (four or more providers). As a result, this POLICY PAPER concludes that current policies which are hostile to the market-opening provisions of the 1996 Act will actually make it harder to achieve President Bush's stated goal of "universal, affordable access for broadband technology by 2007" and will, instead, lead to greater economic concentration and incumbent market power in the industry as firms are forced to exit the market.

Keywords: Telecommunications, Competition, Unbundling, Entry, 1996 Act, Broadband deployment

JEL Classification: K23, L10, L5, L50, L51, L52, L96