Would Home Broadband "Utility" Regulation Lead to Lower Prices?

It never is entirely clear to me what people mean when they argue internet access or home broadband home broadband “should be a utility,” or that such services already are a utility similar to  electricity, gas, water, sewers, phone lines, roads, seaports or airports. 

Some might mean home broadband should be, or is, a public utility in the sense of “common carrier” with obligations to serve the general public. Though most of us would undoubtedly agree with that notion, telecom policy already has such goals. That is why we have universal support support funds and subsidies for operators in high cost areas. 

Others might mean essential or regulated in terms of price or conditions of service. That might imply regulated prices and terms and conditions of service. 

Others might fix on the used everyday sense of the term, which is that internet access is fundamental for inclusion in normal life, as are electricity, fresh water, wastewater services, garbage collection. It might mean that home broadband is essential in the same way that roads, schools, medical care, food supply, airports and seaports are necessary to support life. 

None of that seems to capture the implied meaning that home broadband should be a utility. More likely, there is some expectation that things would be better if prices, coverage, terms and condition of service were regulated in ways that led to lower prices, less competition or some combination of the two. 

And that should raise serious questions. There was a time when all “telecom services” were regulated as monopoly public utilities. But prices were high and innovation low, under that framework. Ironically, if what people mean is that internet access should be a regulated monopoly, the outcome would almost certainly be higher prices and less innovation; lower rates of quality improvement and other forms of customer value. 

Were home broadband regulated, we would see less innovation and investment as well, as potential suppliers would find they cannot make a positive business case. 

   

source: Market Business News 

As it pertains to “home broadband,” generally the term refers to fixed network supply of home broadband, not mobile network supply. 

The expectation that utility regulation would lead to lower prices is almost certainly wrong.

Most of us are too young ever to have experienced “connectivity services” as a public utility. But prices were not uniformly low. 

In 1984, before the breakup of the U.S. AT&T monopoly, calling between states cost about 90 cents a minute. In 1955, a phone call between Los Angeles and San Francisco (not even interstate) cost about 70 cents a minute, not adjusted for inflation.

In 2022 currency that would be about $7.75 per minute. So, no, prices were not uniformly lower under monopoly or public utility regulation. 

Of course, that was by policy design. High long distance charges and high business services were intended to subsidize consumer local calling. 

Were home broadband to become a regulated service, something similar would happen. While prices for some features and plans might be price controlled, other elements of value would increase sharply in price. 

And price is only one element of value. Service innovation was sharply limited in the monopoly era. In the U.S. market, consumers could not own their own phones, or attach third party devices to the network. All consumer premises gear had to be purchased from the phone company, for example. 

To be sure, AT&T Bell Labs produced many innovations. But they were not directly applied to the “telephone service” experience. Those included Unix, satellite communications, the laser, the solar cell, the transistor, the cellular phone network, television and television with sound. 

Though ultimately quite important, none of those innovations arguably applied directly to the consumer experience of the “phone network” or its services. 

The point is that monopoly regulation tends to produce varied prices for different products (some subsidized products, some high-cost products), but also low rates of innovation in the core services. 

Utility regulation would likely not wind up being as beneficial as some seem to believe. Be careful what you wish for.