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CONTACT: Amy Smorodin
July 23, 2009
(202) 289-8928
Broadband Competition: Half Empty or Half Full?
PFF Releases Transcript of June Broadband Event

WASHINGTON D.C. - The competitiveness of broadband markets lies at the heart of many key policy debates today, including the formulation of the National Broadband Plan. Are broadband markets in the U.S adequately competitive? What is the correct metric for determining if consumers are benefiting from today's market structure? These and other policy issues were discussed by a distinguished group of economists at a June seminar hosted by The Progress & Freedom Foundation.  Today, PFF is releasing a transcript of the event, "Broadband Competition: Is the Glass Half Empty or Half Full?"

Jeffrey A. Eisenach, Chairman and Managing Partner at Empiris, LLC, addressed misconceptions about broadband in the U.S., including the position of the U.S. in broadband studies and statistics.  Specifically, he mentioned an inconsistency in counting business connections in country comparisons and how per capita comparisons put the U.S. at a disadvantage.  "I don't think you can make a general case that the U.S. is behind in the world," he explained.  "In fact if you look at what's happening in the U.S. in terms of the speed of roll-out and how quickly that has happened since broadband was deregulated in the U.S. just five years ago, I think what you see is that the U.S. is on a very healthy course."

Thomas Hazlett, Professor of Law and Economics at the George Mason University Law School questions the assumption that a duopoly market requires regulation, pointing to a lack of excess profits for wireline broadband providers.  He also explained how open access rules will not result in better outcomes for consumers.  Referencing the example of deregulation of DSL, Hazlett stated, "that there's actually a very positive correlation between subscribership and deregulation, and a negative correlation the other way around."  He concluded, "Open access rules have actually discouraged and deterred the expansion of broadband networks."

Larry F. Darby, Principal of Darby Associates and Senior Fellow at the American Consumer Institute outlined economic theories and studies which failed to show consistent competition problems where two firms dominated a market.  Darby referenced other duopoly markets apart from broadband, such as those for soda, home improvement suppliers, and shipping, and concluded, "a fair assessment of the usual indices of market conduct from these sectors, conduct toward rivals, conduct toward consumers and performance, profits, progress, innovation, there's no support for the proposition that duopoly requires any government intervention."

Robert D. Atkinson, President of the Information Technology and Innovation Foundation, took issue with assertions that the U.S. is not behind other countries in broadband rankings.  However, he explained this is a result of low computer penetration rates, long "loop lengths," and a lack of government incentives for adoption compared to other countries, not because of structural problems with the market. Atkinson also countered claims that more entrants in the broadband market would be beneficial.  "I think the Washington consensus that basically says more competitors in this space is better, is just fundamentally wrong," he stated. "The reason I think it's fundamentally wrong is because these are incredibly expensive fixed cost capital investments that have to amortize themselves over a certain number of customers."

George Ford, Chief Economist and Co-Founder of the Phoenix Center for Advanced Legal and Economic Policy Studies, observed that many critiques of the state of broadband in the U.S. involve the behavior of firms in the market, not necessarily the structure. He explained that critics and analysts should not be focusing on the number of competitors in the broadband market, but instead asking "does it matter how many firms there are based on what people complain about, and is what you're complaining about actually leading to bad performance from an economic perspective?"

Initial panel remarks were followed with questions from PFF Senior Fellow Barbara Esbin, who served as moderator of the discussion, and audience members.  Complete statements from the panelists and questions from attendees can be found in the event transcriptAudio and video of the event are also available.

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