Monday, February 8, 2016

Better to be "Lucky" Than "Good" When Stimulating Competition

“Better to be lucky than good (or smart),” an adage suggests. Some might say that also applies to the main thrust of communications policy in the U.S. and, perhaps, other markets, which is to encourage competition.

One might argue that the Telecommunications Act of 1996, the most-sweeping revision of U.S. communications framework since 1934, failed, and yet competition has grown. The Internet is the reason.

Where the Act envisioned unbundling and voice competition, we now are in an Internet era where Internet-based apps and services now are at the forefront, not voice.

In other words, “competition in voice services” essentially was the problem to be solved, just at the point that the rise of the Internet was to make all that strategically unimportant.

U.S. policy further has had the emphasis of encouraging facilities-based competition, which initially took the form of assuming unbundling and wholesale would create the basis for sustainable investment in new platforms.

The apparent model was experience with long distance service, which initially took the form of unbundling, then lead to facilities investment.

Perhaps nobody could have foreseen the rise of the Internet and the collapse of the independent long distance market, which once was the cash cow for the whole industry, but now exists largely as a “feature,” not a product.

So far, what has happened is that cable TV networks were upgraded and repurposed to function as full-service telecom networks, and that much demand has shifted to mobile networks.

That is the "luck" part of policy. To the extent competitive policies have worked, it has been because of unforseen developments, not the direct result of direct policy intervention.

Local competition in the U.S., it turns out, was not the result of new entrants constructing new plant, but from the repurposing of the embedded cable television plant and the migration of many households to the exclusive use of mobile wireless services,” argue George Ford, Phoenix Center for Advanced Legal & Economic Public Policy Studies chief economist and Larry Spiwak, Phoenix Center president.

Unbundling has arguably not lead to much new facilities investment outside cable TV and mobility, with one possibly important new exception: Google Fiber, which has spurred a rethinking of possibility for sustainability of many smaller Internet service providers.

Still, it is noteworthy that local access no longer is considered a “natural monopoly” in the U.S. market.

But the larger issue is what to do next.

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