U.S., Canada are Least Concentrated Broadband Markets

Many observers complain about the dominance of cable companies and telcos in the fixed network high-speed access market, but a new analysis by Ofcom, the United Kingdom communications regulator, suggest the United States and Canada have the least concentrated markets among 13 examined by Ofcom.

When the combined retail customer market share of the three largest broadband providers in each country is used as a measure of market concentration, and across the 13 countries for which figures are available, the average share of the largest three providers increased from 64.1 percent to 65.2 percent in 2011.

In the five years to 2011 the change in the combined connection share of the three largest providers in each country ranged from a 20.9 percentage point fall in Poland to a 16.2 percentage point increase in Ireland.

The most concentrated broadband market at the end of 2011 was France (where the largest providers (Orange, Free and SFR/Neuf) accounted for 86 percent of connections), followed by Ireland at 85 percent.

Excluding the United States and Canada (where infrastructure-based competition between local incumbent telecoms providers and cable operators makes the share of the largest three operators a less useful measure of competition) the least concentrated broadband market among our comparator countries was in Poland, where the three largest providers’ combined market share was 57 percent.

That structural difference between North American fixed broadband markets, and those of most other countries, where only a single broadband network exists, also suggests why the U.S. Federal Communications Commission is less concerned than regulators elsewhere about mandatory wholesale access obligations and prices.

While it is far from perfect, robust competition between cable operators and telcos provides a workable level of competition without mandatory access obligations and price control.

The other structural consideration is that, in the continental-sized U.S. market, for example, service providers in both cable and telco industries are prevented from becoming too large. Roughly speaking, no single service provider is allowed to gain more than about 30 percent of total market share.

That necessarily means a larger number of significant providers, on a national level. Still, the Ofcom analysis is significant. Using informal tests of market concentration across more than a dozen nations, the U.S. and Canadian markets are the least concentrated.