Verizon and Free Press Agree that Remote Broadband Requires Monopolies

January 22, 2009 – Verizon Communications and Free Press agreed that bringing high-speed internet technology to unserved areas of western Massachusetts may result in a monopoly, or a single local telecommunications provider.

In separate comments made last month in a state broadband inquiry, the telecommunications giant and the advocacy group both said that economic factors are likely to tilt toward a single broadband provider.

But they disagreed about whether Net neutrality or other open access rules should be imposed upon such a monopoly.

Verizon and Free Press were among 29 organizations that filed comments as part of the “call for solutions” to the problem of bringing broadband to the Berkshires and other areas of western Massachusetts.

Massachusetts is one of the leading states in the drive to promote universal broadband deployment and availability. In August 2008, Massachusetts Gov. Deval Patrick, a Democrat, signed legislation authorizing up to $40 million in state funds to ensure that broadband is available to all the state’s citizens.

The comments were released on the web site of the Massachusetts Broadband Institute, the non-profit entity that will administer the state’s investment in broadband infrastructure.

The comments also provide a window into the arguments that are being made – both in Washington and in the states – about who and how the nation should fund the provision of universal broadband deployment.

“Underlying economic market factors” make it likely that there will be “the establishment of a single broadband provider serving each community,” wrote S. Derek Turner, research director of Free Press, which is based in Northampton, Mass. Referring to the efforts of the Massachusetts Broadband Institute, he said, “That is, the project will result in the establishment of a monopoly.”

Verizon agreed. One of the country’s leading telecommunications companies, Verizon offers digital subscriber line (DSL) service in portions of western Massachusetts, and fiber-optic service in more populous eastern areas of the state.

“While the MBI should look to an array of technological solutions,” Verizon wrote, “its goals and objectives may best be met by the recognition that a single service provider may be the most sustainable business model in some areas.”

“Economies of scale and scope are important factors in today’s telecommunications marketplace,” continued the filing, signed by John Conroy, vice president of regulatory matters for Massachusetts. “Recognizing that a decision that incorporates a single service provider that is best suited to provide the solutions will benefit the Commonwealth.”

Neither Free Press nor Verizon regarded the prospect of a monopoly as a negative.

“Natural monopolies in telecommunications networks are common, and monopoly harms are easily avoided through the implementation of consumer protection policies,” said Turner of Free Press. Among those protections should be rules requiring Net neutrality and wholesale access to competitors.

Verizon urged caution on open access rules. “The economics associated with building and maintaining a broadband infrastructure change dramatically when multiple carriers are allowed to use the infrastructure,” the company said. “Should the MBI proceed with open access requirements, it is critical that specific and detailed terms of use, including pricing, be clear and unambiguous.”

Others companies and trade groups filing comments in the proceeding included AT&T, Alcatel-Lucent, Ciena, and the New England Cable and Telecommunications Association.

Among the non-profits weighing in were Berkshire Connect and Pioneer Valley Connect, which have been seeking to provide broadband connectivity in the four counties of western Massachusetts; and Five Colleges Inc., which discussed the 53-mile fiber ring that it built to connect the colleges of Amherst, Hampshire, Mount Holyoke, Smith and the University of Massachusetts at Amherst.

Massachusetts Broadband References

• Massachusetts Broadband Institute

• Massachusetts Broadband Legislative Information Packet
• Massachusetts Broadband Information and Resources
• Broadband Initiatives in Massachusetts
• Commissioner Sharon Gillett, Massachusetts Department of Telecommunications and Cable
• “Governor Patrick Files $25 Million Broadband Bill,” Press Release, October 18, 2007

BroadbandCensus.com References

• January 17, 2009 – Massachusetts Gov. Deval Patrick highlighted the significance of broadband in his “State of the Commonwealth” address on Thursday, January 15.
• January 16, 2009 – House Appropriations Committee Seeks $6 Billion for Broadband, Would Impose Speed Requirements Upon Most Grant Recipients.
• January 2, 2009 – Broadband Stimulus Package Should Include Funding for State Data, Says Massachusetts
• August 4, 2008 – Governor Deval Patrick signed a bill allocating $40 million for the provision of broadband to unserved areas in Massachusetts.
• Visit BroadbandCensus.com’s Broadband Wiki for a catalog of the various broadband-related stimulus proposals.