High speed access markets in the United Kingdom and United States show a pattern that should fundamentally challenge the prevailing communications policy framework. Simply put, lightly-regulated cable TV operators are emerging as the dominant suppliers of consumer triple-play services.
Telcos not only are losing installed base and market share, but not are facing additional pressure from cable TV suppliers in small business, mid-sized and increasingly enterprise services as well.
Soon, cable TV will enter the mobile business as well. At every turn, some telco advocates have suggested cable would not succeed. Those predictions have been wrong, every time.
Now we also see lightly-regulated Google Fiber, independent ISPs and municipalities creating new alternatives as well.
That is going to cause bigger and bigger problems for regulators and policymakers over time, as policy becomes ever more disconnected from commercial reality.
Increasingly, not only is the “telecom is a monopoly” framework ceasing to be relevant, but policies that assume that framework are clashing with market realities that eventually make clear that legacy telcos are, in fact, not dominant providers, in any sense of the word, in the fixed networks business.
Consider only the strategic high speed access market.
In 2014, for the first time, U.K. cable TV high speed Internet access connections had average speed higher than that of fiber broadband services for the first time.
In the United Kingdom, cable operators also are providing a disproportionate share of the fastest connections.
Average telco ADSL speeds were 6.7 Mbps in November 2013 compared to 5.9 Mbps in May 2013, according to Ofcom.
In the U.K. market, the average download speed of residential cable broadband connections was 40.2 Mbps in November 2013 compared to 34.9 Mbps in May 2013, an increase of 5.3Mbps over six months.
In the United Kingdom and the United States, cable TV high speed connections are faster than fiber to home connections.
Half of households in the U.S. market were, in 2013, able to buy access at speeds between 100 Mbps and a gigabit per second. Some 80 percent could buy service at 50 Mbps or more.
Just about 30 percent of telco customers were able to buy service at 50 Mbps or faster. Just about 10 percent of telco customers were able to buy service at 100 Mbps or faster.
In fact, Bain and Company suggests telcos might have about 30 percent of the installed base of high speed access customers in 2020, and could drop further to about 20 percent installed base by 2030.
Cable access has been faster than digital subscriber line in the U.S. market since at least 2005.
The point is that our older models are ceasing to correspond with “facts on the ground,” where former monopoly providers are being displaced by new competitors.
That might not be true--so far--in the mobile business. But trends in the fixed network business are clear enough. Where the original problem was limiting telco market power to encourage competition, the future problem will be whether former telcos have viable business models, and if so, how they will have to change.
Some of us would therefore argue that it almost never makes sense to waste time regulating more heavily any industry--or industry segment--in decline. Market dynamics already are erasing former incumbent market power.
Of course, that still leaves two fundamental choices: equalize and lighten regulation for all providers, or tighten and equalize regulation for all providers. People will disagree about which approach is better, in terms of encouraging continual innovation and investment.
But the current framework cannot continue forever. It is breaking.
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