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CONTACT: Amy Smorodin
May 1, 2007
(202) 289-8928
U.S. Broadband Policies Should have Narrow Focus
PFF's Wallsten Calls for Reduction of Barriers to Platform Competition

WASHINGTON D.C. - Although recent international broadband penetration rankings have Congress concerned about U.S. broadband policy, these statistics should not play a large role in forming U.S. broadband policy, explains Scott Wallsten in "Towards Effective U.S. Broadband Policies." In the new Progress on Point released today by The Progress & Freedom Foundation, Wallsten identifies many signs that the U.S. broadband market is showing healthy growth. Instead of implementing policies such as forced network sharing or unbundling, policymakers should instead work to reduce barriers to entry into the market.

In his paper, Wallsten, PFF senior fellow and director of communications policy studies, states that international comparisons of broadband penetration do not offer any real insight into the health of corresponding broadband markets. In particular, they fail to take into account geographic factors, demographic factors and consumer preferences that affect supply and demand. Also, some studies fail to consider new platforms, such as mobile wireless broadband. The author suggests, "we should focus on actual investment, the level of competition in the market, and which policies might yield net benefits.

The author also warns against implementing unbundling regulations in light of empirical evidence illustrating its harmful effects. Such forced network sharing policies are intended to promote competition under to the theory that new entrants would use such access as a "stepping-stone" to eventually building their own networks. In practice, however, unbundling regulation reduces incentives to enter the market and invest in infrastructure because forced sharing reduces the return on their investment.

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

Wallsten concludes that in light of the lack of evidence of failure in the broadband market, Congress should be cautious when crafting policy and should minimize government intervention. He explains, "Policymakers must take care to ensure that they do not create the very problems that they want to solve."

Wallsten's paper, "Towards Effective U.S. Broadband Policies," is available on the PFF website. Last week, Wallsten testified before the U.S. Senate Committee on Commerce, Science and Transportation on the broadband industry in the U.S. Wallsten's written testimony for the 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