Thursday, February 15, 2007

Geographic market failure, inconsistent regulatory policy stymie U.S. broadband access

The existing large telecommunications providers invest their money where there is maximum return on investment, which results in a patchwork of coverage throughout the U.S. Telecom providers maximize profits and spend millions of dollars lobbying to create laws that decrease competitive challenges, while having little incentive to provide new services to less population-dense areas of the country, or to increase speed and lower costs for those who already do have service. This state of affairs stands in marked contrast to the situation in those nations that are truly broadband leaders.

In the absence of widespread government initiatives and incentives to roll out broadband services in rural areas, telecom providers have made the decision to maximize profits by rolling out service in those areas that have the highest population density and lowest cost of build-out per customer. The free market wins in the short term, quarterly profits are maximized, but the customers in less-profitable geographic areas lose, and the nation as a whole loses out over the long term, falling behind other nations with more farsighted policies.

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