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CONTACT: Amy Smorodin
April 24 , 2007
(202) 289-8928
U.S. Broadband Rankings Do Not Show Market Failure
PFF's Wallsten Testifies Before U.S. Senate Commerce Committee

WASHINGTON D.C. - Increases in broadband investment and subscriptions rates contradict the argument that there is a problem with broadband deployment in the U.S., stated Scott Wallsten in written testimony presented today to the U.S. Senate Committee on Commerce, Science, and Transportation. Wallsten cautioned against wide sweeping regulation and urged the Committee to only address specific market failures and barriers to entry when crafting government policies and regulation proposed to accelerate broadband penetration.

In response to concerns about the U.S. standing in various international broadband rankings, Wallsten explains these rankings give no real insight into supply and demand factors in each country and, therefore, do not necessarily identify market failures. Also, "many factors differ across countries that affect both the costs of supplying broadband," Wallsten explains, "and the demand for broadband." For example, a recent study shows that some consumers are happy with their current dial up service and have no plans to subscribe to broadband. This should not be viewed as market failure, he states, but as consumer choice.

Wallsten also states that there is not clear market failure in the broadband industry, as illustrated by numerous examples of competition and increased investment. Increased wireless deployment and platform among broadband platforms continues to spur broadband build-out and competition in the market. Continued investment and rapid technological advances also contradict arguments of market failure.

Still, if Congress wishes implement policies to encourage further broadband penetration, Wallsten suggests removing current barriers to entry and impediments to investment. Specifically, franchise law reform for television providers would decrease barriers to entry for those wanting to offer programming over broadband networks and, as a result, would increase demand for broadband service. Wallsten also suggests inefficiently used spectrum be reallocated in order to spur broadband investment.

Wallsten concludes because of the increasing importance of the Internet, "Congress should be cautious and consider very carefully any interventions in this fast-changing industry to ensure that it does not unintentionally reduce incentives to invest in the very infrastructure we all believe is so important."

Wallsten's written testimony for the U.S. Senate Committee on Commerce, Science, and Transportation hearing "Communications, Broadband and Competitiveness: How Does the U.S. Measure Up?" is available on the PFF website.

The Progress & Freedom Foundation is a market-oriented think tank that studies the digital revolution and its implications for public policy. It is a 501(c)(3) research & educational organization.



The Progress & Freedom Foundation