Broadband for All: Policies for a Connected Society

Abstract

Intelligent networks, smart appliances, the Internet of things – whatever it is called, the future that many envision will require a robust Internet, and everyone, or nearly everyone, will need to be connected to it. This paper explores three questions that are foundational to the achievement of this vision of a connected society: (1) How to determine the minimum Internet connection speed compatible with effective participation by citizens in a connected economy? (2) What policy choices influence the availability of broadband networks? (3) What policy choices influence the adoption of broadband by citizens where broadband networks are available? How to determine the minimum speed of Internet connection compatible with effective participation by citizens in a connected economy? Many households are able to obtain very fast Internet connections, often up to 100 Mbps or even faster, and the number of households with access to such a service is increasing. These very fast download speeds, however, are well in excess of what is minimally required for households to participate in a connected economy. It is not necessary that every household has superfast Internet, only that they have a sufficiently fast Internet connection. First, one must determine the services that are necessary for households to participate in a connected economy, and then one must determine the download speed and upload speed that are sufficient for that participation. This paper considers the available information on services and download and upload speeds. While the required minimum standard might be available to most households in developed countries, it is likely not available to all households. What policy choices influence the availability of broadband networks? Cambini and Jiang (2009, pages 560-562) identify three broad policy approaches to broadband deployment. The first, exemplified by the US, features platform competition and a deregulatory approach to FTTP networks, which are not subject to mandatory unbundling requirements. A second approach, exemplified by East Asian nations such as South Korea and Japan, features strong policy intervention and direction from the state to promote FTTP deployment and adoption. A third approach is found in the EU where unbundling of fixed networks figures very prominently. At a broad level, these approaches reflect differing patterns of political and economic institutions among the U. S., the EU, and East Asia. The accumulating empirical evidence shows a sharp divergence, as between North America and Europe, in terms of broadband network availability, adoption and performance. This suggests that the relatively restrained wholesale policies in North America, compared to Europe, have led to more successful broadband outcomes. Where policies of facilities-based competition reach their limits, this paper explores options for extending broadband service. A bidding process to extend service to underserved or unserved areas, or a reverse auction, will hold down the cost of extending service. The cost of such a service extension can be funded, preferably, from general tax revenues, or, if that is not possible, from a broad-based telecommunications revenue charge. This would provide the required funds in the least distortionary and most efficient manner. What policy choices influence the adoption of broadband by citizens where broadband networks are available? Even where policies are encouraging the construction of broadband networks, the vision of a connected society cannot be achieved without the wide adoption of broadband by citizens. Indeed, in telecommunications markets with advanced platform competition across cable, wireline, wireless and satellite infrastructures, encouraging adoption represents a major opportunity to generate additional socio-economic benefits. Recent studies highlight supply-side, socio-economic characteristics – such as age, education, and income – as primary factors that limit broadband adoption (Landry and Lacroix, 2014). Addressing such issues is typically beyond the mandate and skill set of a sector-specific regulator and calls forth the need for broader governmental action (via school system, skills training, etc) Sector-specific regulators can, however, use their tool box of skills and remedies to increase adoption by maintaining a robust commitment to facilities-based competition. Empirical research has shown that broadband adoption is greater in countries with facilities-based competition (Crandall et al., 2013).