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Is Mandatory Unbundling the Key to Increasing Broadband Penetration in Mexico? A Survey of International Evidence

23 Pages Posted: 26 Jun 2007  

Robert W. Crandall

Brookings Institution; AEI-Brookings Joint Center for Regulatory Studies

J. Gregory Sidak

Criterion Economics, L.L.C.

Abstract

We examine empirically the proposition that mandatory unbundling is the key to increasing broadband penetration in Mexico. We begin by reviewing the empirical economic literature on the relationship between mandatory unbundling and two measures of economic performance: (1) broadband penetration and (2) investment by entrants and incumbent network owners. We explain why a policy that aims to maximize broadband penetration might be inconsistent with maximizing static and dynamic efficiency. Next, we present new empirical results on the effect of mandatory unbundling on investment by entrants and incumbents. We find that, despite the best efforts of the regulators, no EU country has experienced the promised transition from resale to bitstream to local loop unbundling (LLU). Countries with strong unbundling policies, such as those in the EU, have much lower incumbent network investment than countries that have much less aggressive wholesale unbundling policies, such as Canada and the United States. We conclude with alternative policy recommendations for stimulating broadband penetration in Mexico. Because access to computers is the binding constraint on broadband penetration - only 20 percent of homes own a computer - we propose that Mexico subsidize the price of computers to stimulate broadband adoption.

Keywords: Broadband Penetration, Unbundling

Suggested Citation

Crandall, Robert W. and Sidak, J. Gregory, Is Mandatory Unbundling the Key to Increasing Broadband Penetration in Mexico? A Survey of International Evidence. Available at SSRN: https://ssrn.com/abstract=996065 or http://dx.doi.org/10.2139/ssrn.996065

Robert Crandall

Brookings Institution ( email )

1775 Massachusetts Ave. NW
Washington, DC 20036-2188
United States
202-797-6291 (Phone)
202-797-6181 (Fax)

AEI-Brookings Joint Center for Regulatory Studies

1150 17th Street, N.W.
Washington, DC 20036
United States

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

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