Technological and geographic heterogeneity in broadband markets: The challenge for regulation

Abstract

When the telecommunications industry was liberalised in Europe and North America in the 1980s and 1990s, it inherited a legacy of monopoly providers whose footprint was national or multi-regional in its character. The regulatory framework, particularly that adopted in EU member states, reflected this pattern of relatively homogeneous deployment achieved, in part, by decades of cross-subsidised pricing and universal service goals. Perhaps because of this legacy, telecommunications regulators have often adopted the presumption that relevant markets are national in character, unless proven otherwise Although geographically-variegated regulatory remedies have been permitted (even in the face of allegedly national relevant markets) and adopted in many member states, many regulators have never done so, and overly cautious thresholds for permitting geographically based forbearance suggest a continued bias towards presuming national markets and remedies. We find that this presumption of uniformity and the tendency to aggregate geographic markets together is not supported by first principles of antitrust analysis, although there may have been strong practical reasons to apply this presumption in the past circumstances of the telecommunications and broadband industries.On the ground, however, there has arguably never been as much heterogeneity across geographies and across technological solutions that provide effective ultra-fast broadband speeds. Both technological (i.e., product market) and geographic heterogeneity are likely to increase with the advent of mobile 5G networks. With their deployment, a cautious regulatory stance towards geographic variation and a cautious regulatory stance towards inter-technology or inter-modal competition may result in regulation that could exceed what is required to ensure effective competition and could instead distort the incentives to enter of facilities-based actors. This may also result in higher-cost and inefficient investment. A more geographically varied and technologically agnostic regulatory framework may satisfy the principle of proportionate and focused regulation—with the possibility that the locus of regulation shifts from the access network to bottleneck facilities such as fibre, ducts and poles.This discussion is especially germane when one considers the highly speculative nature of forecasts and projections about future demand, and the competing claims of proponents of 5G and fibre. While there is some scepticism about the performance of mobile networks, we note that pure mobile and fixed 5G services may have synergies in deployment, and that the idea of competing with residential broadband services is a core strategy of very influential large-scale industry actors. In terms of a future research agenda, regulatory decisions could benefit from much more research into the relationship between domestic and global bandwidth constraints and their influence on development of software and application, as well as much more quantitative research by academics on the drivers of bandwidth demand. The risks associated with promoting investment that results in large-scale wasted resources should also be central to the regulatory agenda.