Tuesday, August 02, 2016

Market failure, not lack of competition drives telecom infrastructure deficiencies, disparate access

Charter, Comcast, AT&T Really Want To Stall Chance Of Competition From Google Fiber – Consumerist: As we’ve seen over and over again, high-speed broadband competition is hard to come by in huge swaths of the country. And one reason for that is because incumbent companies, especially AT&T, have a habit of throwing their weight around when competition does finally (try to) come to town. Meanwhile, though, it remains the best chance for consumers: both Comcast and AT&T charge less for their service in cities with Google’s super-speedy competition.
"Lack of competition" continues to be proffered as the primary rationale for America's telecommunications infrastructure deficiencies and disparate access. But that's the wrong analysis for the simply microeconomic fact that telecommunications infrastructure connecting customer premises is not and will never be a competitive market with many sellers and many buyers. The cost barriers to entry for would be competitors are too high. That's why one doesn't typically see multiple natural gas, water or power lines serving a given premise. It would be ridiculously wasteful and make it even harder for the builder of that second or third connection to achieve a return on their investment in a reasonable time frame.

The real reason the United States suffers from less than world class infrastructure connecting all homes, businesses and public institutions is excess reliance on investor-owned infrastructure providers overly prone to market failure. Since the microeconomics don't work, they can't meet the buyer side demand for affordable access even as it grows exponentially. They simply cannot make a decent return on investment, so they naturally don't invest in infrastructure. Not because they "refuse" to as many analysts claim. Because they simply can't afford to, whether it be AT&T, Comcast, or Google Fiber.

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