Monday, May 18, 2015

Facilities-Based Competition Offers More Room for Innovation, Typically

Among the reasons U.S. retail communications service providers do not like the new common carrier regulation of consumer Internet access, both mobile and fixed, is that common carrier regulation introduces huge amounts of uncertainty in what otherwise would be rather simple pricing and packaging decisions.

The argument is pretty simple: any single pricing or packaging decision can, under the common carrier rules, be challenged at the Federal Communications Commission, potentially opening an inquiry that could take a year to resolve.

Obviously, given the speed at which most communications markets evolve, that introduces huge amounts of delay, even when the review process eventually allows a service provider to proceed with a change.

There are other potential implications. In the United Kingdom, Ofcom the U.K. communications regulator, says it will not rule out ordering a structural breakup of BT, into a wholesale-only network services arm, and a retail provider operation.

Such structural separation is a feature of the communications framework in Singapore, New Zealand and Australia.

Proponents of structural separation favor the perceived positive impact on competition. Opponents tend to focus on the possible limits on innovation. When all providers are buying wholesale access and features from one supplier, it is harder to differentiate.

One example of facilities-based competition comes in the U.S. fixed network high speed access market, where Google Fiber and Comcast, on their own networks, can create disruptive offers that would not be possible if they were buying wholesale access, just as all other retail services suppliers do.

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