Surprise! More competition serves consumers…
From a paper entitled How does access regulation affect broadband penetration?, the authors do a study trying to determine the type of regulation that provides for the highest acceptance of broadband internet access.
They compare three regulatory regime styles that in turn allow for:
- single technology where resellers sell the same thing
- single technology where resellers also can invest in their own infrastructure
- multi technologies
They found that those jurisdictions that allowed for multiple types of broadband infrastructure happened to have higher broadband penetration rates.
In the third option where more competition exists, there was better market access and therefore more purchases.
Differences in regulatory policies have also played a crucial role. Countries that promoted competition between different platforms (e.g. by investing in cable infrastructure) have done significantly better. In contrast, countries that mainly promoted service-based intra-platform competition on the incumbent’s network have on average done worse. This is consistent with the view that service-based competition does not provide sufficient investment incentives to new entrants and discourages investment of the incumbent operator.
This isn’t surprising - more competition provides for more options for consumers, better prices and if the product has any efficacy at all, higher penetration. Their phrasing that “regulations matter” is slightly obtuse when they don’t correlate that number three explicitly has looser regulations than the other. It’s not that the regulations pursue a particular technology it’s that they provide for increasing levels of competition. What is surprising is that the authors weren’t merely looking for a proof that more open markets provide better outcomes.
Their conclusions instead of promoting their third option should have been to promote the unstated fourth option: allow industry to provide broadband access by whatever technologies are available (except where those technologies which create negative externalities). New options will be explored and provided, the garbage will drop out of the market and society will be better off.
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Nice writing. You are on my RSS reader now so I can read more from you down the road.
Allen Taylor