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National Broadband Plan: A Look at Chapter 4 and Networks

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Editor’s Note: This is the third in a series of articles written by staff summarizing each chapter of the FCC’s National Broadband Plan. Chapter 4 summaries will appear in three separate articles due to the breadth of the chapter’s content.

WASHINGTON, April 1, 2010 - Section Four of the plan focuses on broadband competition and innovation policy. It’s one of the most far-reaching sections in the entire 360-page document. It starts by addressing various mobile and fixed networks and moves on to discuss specific devices, privacy and identity theft. It concludes with discussion about the need for innovating and changing the current network.

Competition is a main theme of the document. The FCC concedes that facility-based competition is limited due to the high-cost to new entrants. Even though policies may be created to encourage new competitors, these entrenched costs may prevent new entrants into an established market.

The Justice Department also has been unable to determine if the current level of competition is adequate. The following section comes from a discussion between Justice and FCC officials:

“We do not find it especially helpful to define some abstract notion of whether or not broadband markets are ‘competitive.’ Such a dichotomy makes little sense in the presence of large economies of scale, which preclude having many small suppliers and thus often lead to oligopolistic market structures. The operative question in competition policy is whether there are policy levers that can be used to produce superior outcomes, not whether the market resembles the textbook model of perfect competition. In highly concentrated markets, the policy levers often include: (a) merger control policies; (b) limits on business practices that thwart innovation (e.g., by blocking interconnection); and (c) public policies that affirmatively lower entry barriers facing new entrants and new technologies.”

Even though the Justice Department has been unable to determine what is a competitive market, the FCC believes that more providers will decrease the cost to users. This is based on simple economics dictating that an increased supply will cause prices to decline.

Although there may be too few competitors in a market, as a single provider upgrades its service a competitor is forced to either lower costs or upgrade its own service to compete.

In order to determine if the current number of actors is enough to sustain competition, the FCC recognizes that increased data is necessary. This echoes another major theme of the plan - the acquiring of accurate and continuous data.

While many surveys have shown that download speeds have increased 20 percent during the last decade while prices have generally declined, the specific changes have not been properly charted due to a lack of data. In regards to price with the increasing bundling of data, voice and video services, the ability to extract the specific price for data has become quite difficult. These bundles often come with promotional prices, which generally are only good for a year or so and then increase.

While competition in the fixed wireline market may be murky at best, mobile broadband market is even more ambiguous. Access to fixed wireline is easy to determine, but access to wireless is difficult due to speed and signal strength issues.

Again the ability for the FCC to determine the level of competition availability and signal strength are hampered due to a lack of data. This is going to become an increased problem with the increasing expansion of Long Term Evolution, WiMax and High Speed Package Access (HSPA) technologies.

Rahul Gaitonde has been writing for since the fall of 2009, and in May of 2010 he became Deputy Editor. He was a fellow at George Mason University’s Long Term Governance Project, a researcher at the International Center for Applied Studies in Information Technology and worked at the National Telecommunications and Information Administration. He holds a Masters of Public Policy from George Mason University, where his research focused on the economic and social benefits of broadband expansion. He has written extensively about Universal Service Fund reform, the Broadband Technology Opportunities Program and the Broadband Data Improvement Act

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