There is an adage that goes “Fast, Cheap or Good? Pick Two.” In other words, when developing an app, service or network, one can choose “quick and cheap” at the price of inferior quality and features.
One can choose “quick and high-quality,” at the forfeiture of “cost” (“cheap”). Or one can choose “high quality and low cost,” but that will not be “quick.”
That arguably also generally applies to access network choices and regulatory frameworks. The obvious example are fiber-to-home networks. With the key caveat that what can be done in a small area is a different challenge than wiring a continent, rapid universal deployment will be costly.
Alternatives to FTTH might be possible, offering rapid coverage at low or lower cost. But FTTH is virtually never high-quality and low-cost and “accomplished quickly.”
In the 5G realm, the tradeoff might be that a mobile operator can build a coverage network quickly, at lower cost, but at the expense of bandwidth improvement (quality). Or coverage and bandwidth might be attempted, but only at high cost.
A “low or lower cost” network with “high quality” (lots of bandwidth) might be chosen, but that cannot be done quickly.
Likewise, most communications regulators believe monopolies are injurious to competition, innovation and investment. Most arguably believe oligopolies are not much better. And yet the degree to which that is true is a bit unclear.
But the iron triangle also applies to communications policy objectives. Policy frameworks seeking lots of bandwidth and which can be deployed fast are expensive. Frameworks emphasizing high-bandwidth and low cost will take longer to produce results.
Policies emphasizing good coverage at low cost will sacrifice bandwidth.
More competition can lead to lower profit margins and hence less ability to make investment, with fewer possible suppliers.
Uganda has a mobile duopoly and yet subscriptions keep climbing. In the fixed networks market, while some would argue that the cable operator-telco duopoly is not competitive, others would point to declining prices, heavy investments in bandwidth supply and available speeds as evidence that competition is producing results.
In the telco world, faster home broadband is nearly synonymous with fiber to the home upgrades. In the U.S. and many other markets, the issue is available bandwidth, not physical media.
More than 80 percent of U.S. homes can buy gigabit per second internet access if they choose, from the local cable operator. And though U.S. telcos are stepping up their optical fiber access investments, fewer homes are reached by FTTH.
The point is that even a duopoly is capable of producing robust competition. Consider the U.S. market, where cable TV providers have about 70 percent of the installed base of home broadband accounts.
The point is that duopoly, oligopoly or even monopoly can produce retail competition. There is room to argue about how much competition, investment or innovation is possible. But connectivity no longer is a “natural monopoly” in terms of retail competition.
There is a stronger argument for infrastructure monopoly in many markets. And duopoly might be the only realistic outcome in some mobile markets, even if most regulators believe three is the minimum number of mobile firms necessary to promote robust competition.
And duopolies can produce serious competition.
According to the Federal Communications Commission, 88 percent of U.S. homes can buy internet access at gigabit speeds, and most of those homes are able to buy from cable TV providers.
Telco fiber-to-home coverage is about 43 percent of homes, according to the Fiber Broadband Association.
The NCTA says home broadband speeds have increased 1880 percent over the last decade alone, and sometimes argues gigabit service is available to as much as 80 percent of U.S. homes.
Former FCC staffer George Ford has quipped that, for policymakers, the desired number of competitors is always “one more.” Ford, now Phoenix Center for Advanced Legal and Economic Public Policy Studies chief economist,
The other obvious problem is the capital intensity of communications access networks. That limits the number of viable firms.
In most countries, “one” is believed to be the viable number of fixed access networks, leaving wholesale as the only option to increase the number of retail providers. Ford has noted that, if the FCC had realized there could be fixed network competition by two facilities-based providers as now exists, it would have declared victory and gone home, so rare an outcome that would have been.
“In my experience, ‘promoting competition’ is unlikely to have a material effect on actual competition. In fact, it often has the opposite effect,” says Ford.
So it is possible to debate whether infrastructure or retail competition produces better outcomes, especially since, in many markets, rival fixed network facilities-based competition is deemed infeasible for financial reasons.
The mobile markets have emerged as exceptions to the rule, as virtually all markets have had multiple facilities-based competitors. But even there, some argue single wholesale networks have drawbacks, compared to infrastructure competition.
But we cannot attribute better consumer outcomes--such as declining internet access and data usage costs--solely to competition frameworks, as global costs have dropped no matter what form of regulation is in place.
Moore’s Law also operates,meaning network infrastructure costs can drop. Moore’s Law also allows commercial use of formerly-unusable resources, such as millimeter wave spectrum.
All networks, public or private, wide area or local area, now are computer networks, able to take advantage of continual advances in virtualized approaches to building and operating networks.
The disaggregated and layered approach of the internet also allows innovation to be unbound from gatekeepers. And that innovation includes ways to avoid closed, captive and scarcity-bound features and services. That also pushes prices lower and raises rates of innovation, under any network policy framework.
The point is that consumer benefits might rely less on the form of competition (single or multiple facilities-based networks) and more on application layer competition. That noted, retail access competition, however provided, arguably still is a requirement for better consumer welfare outcomes.
The iron triangle is a tough constraint for app developers, network infrastructure suppliers or policymakers.
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