Wallsten: Competition is Benefit of New Gigabit Networks, Not Increased Speed
Contact: Amy Smorodin
May 21, 2013 – Exclusive focus by policymakers and advocates on increasing broadband speeds removes from consideration other metrics that may be as or more important to innovation, explains Scott Wallsten in “The Real Benefits of Gigabit Networks Have Nothing to do with Speed,” released today by the Technology Policy Institute. The focus on broadband speed, “also obscures the real benefits of new high-speed networks like Google Fiber, which include new competition and revealed information about how local rules and regulations can hamper entry into the broadband market.”
Wallsten, Vice President for Research and Senior Fellow, identifies broadband speed as just one attribute of broadband quality. Others that affect broadband performance, and possibly innovation, are latency, packet loss, and reliability to name a few.
“Just as we have no evidence that slow speeds are harming innovation,” Wallsten states, “we also have no evidence that latency or other quality attributes are harming innovation. Rather, the point is that we don’t know which quality attributes matter most for innovation and that it is more important for policymakers to learn the answer to that question rather than setting arbitrary goals for one attribute.”
Wallsten lauds new network initiatives because they introduce more competition in the broadband market, not necessarily because of increased speeds, as no applications to date make use of super-fast speeds. “Moreover,” he continues, “their efforts have laid bare how local regulatory rules thwart entry into the broadband market. It has also revealed the costs of using regulation to achieve laudable social objectives, and how the market can help achieve those objectives.”
Wallsten identifies such issues as pole attachment regulation, access to rights-of-way, and build out requirements imposed on telecommunications companies as discouraging market entry. New fiber networks, such as Google Fiber, were allowed to choose localities where the regulatory environment was not a hindrance, thus highlighting how such rules discourage competition. “While build-out requirements and other obligations may yield benefits,” he advises, “policymakers should be clear that the cost of such rules is a higher barrier to entry. As such, policymakers need to consider if the requirements are indeed the best way to achieve social goals.”
Although most of the attention on new fiber networks has focused on the increased speed, Wallsten views new low-end subscription pricing models, such as Google Fiber’s 5Mbps service for no monthly fee, as a possible radical innovation resulting from new entry. “It is conceivable that this type of pricing,” he explains,” should it prove to be part of a sustainable business model, could help close our income-based digital divide while also improving service quality at the low-end.”
“The Real Benefits of Gigabit Networks Have Nothing to do with Speed” is available on the TPI website.
The Technology Policy Institute
The Technology Policy Institute is a non-profit 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/.