Wallsten Disputes Scientific American’s Call for Internet Regulation
Contact: Amy Smorodin
October 13, 2010 – A recent editorial on U.S. broadband is based on a flawed understanding of broadband data, addresses the wrong issues, and distracts from real policy concerns, states Scott Wallsten in “Scientific American’s Flawed Broadband Analysis,” published today by the Technology Policy Institute. The editorial’s assertions that broadband prices are too high and speeds are too slow ignore the more nuanced state of the broadband market, the author explains, and do not support proposals to mandate network neutrality, unbundle access to local loops, and reclassify broadband in order to regulate access.
Wallsten, TPI Vice President for Research and Senior Fellow, explains in the critique that while advertised speeds for broadband do appear to be faster in other OECD countries, as the editorial claims, the actual speeds consumers receive are, with some exceptions, similar. The data suggest that consumers choose not to purchase the higher speeds even when available because slower speeds are adequate for the online activities most consumers engage in. Wallsten also points to a recent FCC survey which reveals “speed seems to be of so little concern to most U.S. broadband users that 80% of them don’t even bother to remember or check their own speed and the majority of them are satisfied with their own speeds.”
Wallsten agrees with the editorial’s assertion that very fast connections are priced higher in the U.S. relative to other countries but explains that slower connections in the U.S. are priced quite favorably. Moreover, prices in the U.S. reflect the price discrimination inherent in any industry with high fixed costs. “It is generally understood that price discrimination-in the sense of charging more to customers who value a service highly-makes it possible to offer lower quality, lower price options for people who value the service less, bringing more people into the market and increasing consumer welfare,” Wallsten explains. He also suggests that price regulation in other countries, not competition, could result in the lower prices for higher speeds.
Wallsten also takes issue with the editorial’s assumption that residential broadband is a major indicator of a country’s competitiveness in the information economy. Instead, he explains, “a ‘knowledge-based economy’-which probably includes factors like the relationship between ICT use and productivity-is likely related more to business than to residential use of broadband.”
Wallsten asserts the editorial “focuses on the wrong issues, thereby further distracting Congress and agencies from more urgent broadband policy ‘to-dos.'” Instead of pursuing reclassification of broadband and mandating network neutrality, as the editorial suggests, Wallsten urges policymakers to refocus on freeing and re-allocating spectrum to promote competition in the broadband market. “Eliminating barriers to wireless broadband growth is far more relevant to the future of broadband and national competitiveness than is the availability or price of 100 Mbps residential broadband,” Wallsten concludes.
“Scientific American’s Flawed Broadband Analysis” is available on the TPI website.
The Technology Policy Institute
The Technology Policy Institute is a research and educational organization that focuses on the economics of innovation, technological change, and related regulation in the United States and around the world. More information is available at https://techpolicyinstitute.org/