Communications regulators and service providers always face a cruel tradeoff: over the long term, investment that boosts revenue tends to be inversely related to the amount of competition.
So regulators always face policy tradeoffs. Regulators can emphasize investment or competition, but arguably not both--at high levels--equally and simultaneously. Up to a point, competition creates incentives for investment. But only up to a point.
The reasons are obvious enough. If regulators take a wholesale-based approach, with one network serving all retail providers, the facilities provider’s incentives to invest are limited by government policy. By definition, all retail providers get access at the same rates and terms and conditions. So, as competition increases, incumbents who generally build the wholesale facilities lose ever more market share.
Facilities-based competitors find that incentives to invest increase as the number of competitors is effectively limited (by merger, less wholesale market entry), since contestant market share increases. And that means higher gross revenues and generally higher profit margins.
Also, investment in internet access facilities is something of a zero-sum game.
Internet access providers long have known that there is no linear relationship between data consumption and revenue earned for providing that access. On the other hand, there is a somewhat linear relationship between cost per bit and data consumption.
New data from the U.K. Department for Digital, Culture, Media & Sport shows that although mobile customer spending on mobile internet access is roughly flat between 2012 and 2016, data consumption and cost per bit show a relatively inverse and linear relationship.
As mobile data consumption increased by an order of magnitude over those years, the cost per bit dropped by an order of magnitude.
The business model implication is clear: increasing end user data consumption does not lead to revenue increase.
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