October 22, 2007 9:32 AM
Considering the Role of Competition at an ITIF Event in DC
This past Friday morning I caught a cab and headed across the National Mall to attend a morning event put on by the Information Technology & Innovation Foundation entitled “Building the Broadband Economy and Society.”
The first session presented an interesting dialogue about the current state and necessity of competition in the broadband access market.
It sparked some thoughts I’ve been having about the future of competition, in particular the comments of Ev Ehrlich, who in a past life served as Under Secretary of Commerce for Economic Affairs, and Rob Atkinson, president of the ITIF.
Ehrlich pontificated about the nature of competition and how we can tell if it’s working in markets.
In his estimation, the fact that the telecommunications marketplace appears cognizant of pricing and value suggests the right forces are in place to spur innovation.
He explained, often in oligopolies, or markets dominated by a small number of sellers, products are static as the need to differentiate doesn’t exist.
He argues, though, that the broadband market is proving quite innovative, as evidenced by lowering prices, increasing speeds, and improving services.
He cited the fact that old natural monopolies—ie the telephone companies offering telephone and the cable companies offering TV—are starting to compete as further evidence the current regulatory regime is working.
He sees within this new dynamic a duopoly that’s racing to figure out the best way to sell broadband so as to differentiate their services from other last mile access technologies.
Rob came at the issue from a different angle, questioning the often unchallenged need for more competition in telecommunications. “We’ve elevated competition to a level of sainthood,” he said. “Do we really want four pipes to every home?”
A big challenge in deploying wireline broadband (wireline equals cables in the ground or strung across poles) is the high upfront capital cost needed to install the infrastructure.
More pipes means less marketshare per provider making it more difficult to amortize the costs, according to Atkinson. (Unless we can somehow get the 50% of Americans who don’t have broadband at home to sign up and start dramatically increasing the size of the consumer pie, of course.)
As such, more pipes do not necessarily mean lower prices. He believes that while we should never impose barriers to competition at the same time artificially inducing competition may not be the best approach, especially as a default policy stance. (He’s gone into a ton more depth about these thoughts in a recently released paper about “The Role of Competition in a National Broadband Policy,” which I’m reviewing now and will right up more in-depth comments shortly. You can find it on the ITIF website.)
Rob’s questioning the need for four pipes to every home got me thinking about two questions I often pose to colleagues in discussions about these issues:
- How can we avoid a future where some homes are getting multiple fiber connections while others have none?
- Should we be focusing our attention on spurring competition based on the physical characteristics of last mile access technologies or instead on the services they deliver?
I pose these questions set against the backdrop of my fundamental and oft-stated belief that the ultimate realization of the Internet is a fiber optic cable strung to every home. And the understanding that a single strand of fiber has shown enough capacity in the labs to handle all the world’s Internet traffic.
In my mind, what all this means is when thinking about the future of competition in telecommunications, we must consider the possibility of a One Pipe World – a world where one fiber pipe delivers many services into the home, providing fertile bandwidth-rich soil in which applications and services can develop and compete.
I know we’re a long ways away from a One Pipe World being realized on any significant scale—it’ll take not only more fiber-to-the-home but also greater demand for the capacity it provides by consumers—but at the same time we’re not so far away in some instances, as I discussed last week in my post about the impossible dream of competitive broadband in unserved areas.
Yet I have to admit, I’m not sure if we’ll ever fully transition into a One Pipe World at any point in the future, but it seems important to start having a dialogue that explores whether creating a One Pipe World is a goal we should be shooting for, an inevitability we should be preparing for, or nothing more than the musing of one overly imaginative blogger.
In any event, it was refreshing to attend an event about competition in telecommunications that expanded the debate beyond encouraging competition between last-mile access technologies as the penultimate approach to telecom policy.