Private investors are more than capable of funding a workable broadband initiative
Regulators should beware of gifts brought by academics. Susan Crawford’s op-ed in The New York Times earlier this week still left me perplexed as to why she believes that increasing the level of regulation on broadband providers will some how create a more competitive environment while increasing the level of broadband adoption to the remaining one-third of American households who do not have high-speed broadband access. Let’s take a closer look at her arguments as presented in the piece.
First, Professor Crawford argues that broadband prices are too high and speeds too low because access to high-speed Internet is hampered by the concentration of providers in the broadband access industry.
In actuality prices are high because of the overall growth in demand for broadband access, both wired and wireless. Where cable companies are providing broadband, bundled packages may be increasing in price because of the pressures cable operators get from programmers who seek to increase their prices every year. Just look at the demands of an ESPN.
In fairness to Professor Crawford, she has a point on how wired access increases productivity especially in the area of home businesses. My son is more productive with broadband coming into the home, and I sure can’t blog on a smartphone.
Second, Professor Crawford argues that regulation unleashes competition and innovation. It never has. Where she is wrong is in her assumption that regulation will create a globally competitive, ubiquitous communications infrastructure. On the contrary, the opposite may happen due in part to actions of local and state governments.
If state and local governments continue to push the enevelope on gross tax receipts, franchise fees, and public, governmental, and educational access channel requirements, investors will have less incentive to finance the entry of a competitive broadband provider. These requirements bite into the bottomline of these firms which means less shareholder wealth to pass on. In addition to less shareholder wealth there are less residuals with which to reinvest into innovative products and services.
And while in her third point Professor Crawford argues that municipalities can provide competitive broadband networks, do they really have to be financed by tax-payer funded infrastructure banks? We have a private equity and investment bank structure capable of raising the capital for public and private broadband deployment initiatives. Taxpayers shouldn’t have to fund a communications infrastructure from taxes.
Finally, unless Professor Crawford is a closet supply-sider, with 100 million households allegedly unserved and hungry for broadband why not offer these households vouchers instead of directing universal support funds to new entrants who may have a hard time showing they have the scale to serve 100 million households. After determining the average annual cost to consumers for broadband, a voucher system could be implemented that provides directly to the consumer the difference between what a consumer pays for teleccommunications services and what the consumer would pay for a bundled package of telephone and Internet access. Rather than arguing that the Connect America Fund is flawed for directing money to incumbent providers ( I think it’s flawed because it exists, but that’s another blog piece), the CAF could be redirected to stimulate further demand for broadband by putting the funds in the hands of the consumer.
We can get to what Professor Crawford wants without another piece of regulation