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Is Broadband Essential?

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For many years, I’ve heard people say that broadband is essential. I read it in articles. I hear it on broadband panels and webcasts. I see it said in comments on social media. It’s obvious that a whole lot of people think broadband is essential.

But what exactly does that mean? Does it mean that broadband is important in a lot of people’s lives, or does it mean that broadband is something that society can’t live without?

A lot of things are important enough in people’s lives that they could be considered to be essential to society. Grocery stores and the whole supply chain of delivering food seem to be essential. Gas stations and auto repair shops that keep our vehicles moving seem to be essential to most people.

I don’t think anybody can deny that these and similar industries are essential for society. But these industries all have one thing in common- they are all operated by commercial businesses. These industries are only lightly regulated, mostly to protect the public from harm. There are rules about food safety and mandatory recalls of bad food products. There are safety rules about the transport and storage of gasoline. But these industries are fairly free to operate freely in the market as long as they don’t harm the public.

Nobody forces these industries to serve everybody. There are food and gas station deserts in urban areas. There are plenty of rural counties with no big grocery stores. Nobody protects the companies in these industries from failing—there are plenty of failed grocery stores and gas stations around the country.

There is another set of industries that are so essential that the government regulates them as monopolies. It’s unheard of for somebody to build a second water system to serve homes. It’s rare to have anybody building a second set of electric wires. In some states, the sale of retail electricity is considered to be competitive, but it’s a false kind of competition that is nothing more than a form of arbitrage. These essential industries are heavily regulated.

Where does broadband fit into this spectrum of businesses? When people say broadband is essential, do they mean essential like grocery stores or essential like water companies? The question I always ask people who say that broadband is essential is to ask them what they would do about the industry if they were in charge.

If they say that broadband should be totally regulated like water, I wonder if they know what that means. It’s hard to imagine having a rigidly regulated broadband industry where the government would be involved in choosing market entrants and setting rates. Could a fully regulated industry have real competition? For instance, what would it look like to have a regulated market that has both a regulated fiber company and a regulated cable company? What would stop one of the competitors from getting most of the customers and driving the other out of business?

Rigidly regulated industries tend to evolve into monopolies over time because competitors don’t clamor to invest in a market where profits are controlled by the government. A lot of the U.S. broadband markets are near monopolies today for a single ISP—and when I talk to folks in these markets, all I hear about is the desire for competition. I can’t ever recall hearing from somebody who said they only want one choice of ISP.

If broadband is essential, but total heavy regulation isn’t the right answer, then what is? It seems like this is the situation we have today. Some markets have vigorous competition today, while others are served by virtual monopolies. What magic wand can force monopoly markets to suddenly be competitive? This is what made me raise the question.

I’ve spent 25 years as a broadband advocate, so it’s obvious that I think broadband is incredibly important. But I shudder to think of the steps needed to dismantle the current broadband market to put in place a system that would guarantee inexpensive broadband to everybody. That might be possible with a subsidy program far larger and more robust than ACP, but I can’t imagine we’ll ever have the political will to go there.

There are a lot of flaws with our current broadband market—most of which can be blamed on having a tiny handful of giant ISPs that serve the vast majority of customers in the country. The best way to improve the broadband market is with real competition, but the lack of capital to build expensive new networks is always going to remain a barrier to entry. New competitors don’t show up in a market because they think broadband is essential but because they think they can do better than the incumbents and make a lot of money. I still don’t know the degree to which broadband is essential, and would love to hear what others think about the question.

By Doug Dawson, President at CCG Consulting

Dawson has worked in the telecom industry since 1978 and has both a consulting and operational background. He and CCG specialize in helping clients launch new broadband markets, develop new products, and finance new ventures.

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