Before the Affordable Care Act outlawed the practice starting this month, individual health insurers employed underwriters charged with selecting relatively healthy individuals less likely to incur high medical costs, refusing to offer coverage those who didn’t meet specified underwriting standards. Similarly, wireline residential Internet service providers offer service to one address while declining to serve another nearby – even as close as quarter of a mile away or less. As individual health insurers did, these providers reject the latter residences (as well as some small business sites) as more costly to serve and thus less potentially profitable. Their infrastructures are engineered and built to accommodate preferred addresses and redline the rest.
Analysis & commentary on America's troubled transition from analog telephone service to digital advanced telecommunications and associated infrastructure deficits.
Monday, January 13, 2014
Strong parallels between individual health insurance and Internet service markets
Before the Affordable Care Act outlawed the practice starting this month, individual health insurers employed underwriters charged with selecting relatively healthy individuals less likely to incur high medical costs, refusing to offer coverage those who didn’t meet specified underwriting standards. Similarly, wireline residential Internet service providers offer service to one address while declining to serve another nearby – even as close as quarter of a mile away or less. As individual health insurers did, these providers reject the latter residences (as well as some small business sites) as more costly to serve and thus less potentially profitable. Their infrastructures are engineered and built to accommodate preferred addresses and redline the rest.
Friday, January 10, 2014
Protectionist policies called greatest regulatory threat to fiber to premise Internet infrastructure expansion
At the same time, however, they have sought protectionist policies barring public sector providers from doing so with lower cost business models financed by more patient capital that doesn't require a high, short term return on investment. From their perspective, their service territories whether they fully serve them or not are their proprietary franchises. Hence, the need for protectionism to keep others out.
"The incumbents won't upgrade to fiber, Mr. President, because it's an option they cannot choose." |
In fact, looking toward 2014, perhaps the biggest regulatory threat to new FTTH deployments is a push by politicians in many states to restrict municipalities and other public entities or public/private partnerships that want to build their own networks where incumbent providers (typically milking old, obsolete systems) refuse to do so.Click here for the full article (.pdf)
The New America Foundation issued a critical report on U.S. Internet service on January 15, 2014. It urges the U.S. Federal Communications Commission work with Congress and other stakeholders to implement the 2010 U.S. National Broadband Plan’s recommendation that state-level barriers to municipally-built Internet infrastructure be eliminated.
Wednesday, February 29, 2012
Colorado bill first step in state investment in Internet infrastructure
Schwartz said the intent of the Rural Broadband Jobs Act is to help Colorado improve access to broadband so that businesses throughout the state have opportunities to be competitive and successful.
“I am looking for a definitive assessment of underserved and unserved areas in our state that lack broadband access,” Schwartz said in an interview with Government Technology. After those areas are defined and as funding becomes available, she’d like the state to invest in the infrastructure needed to bring broadband to those underserved locations.
Click here to read Colorado Senate Bill 12-129, CONCERNING ACCESS TO AFFORDABLE BROADBAND INTERNET CONNECTIVITY IN NONCOMPETITIVE RURAL AREAS.
Wednesday, May 12, 2010
U.S. telecom market needs alternative business models, not more regulation
This is perceived as a regulatory conundrum by regulators like the FCC. Too much regulation, the legacy telco and cable companies warn, will choke off infrastructure investment. The implication that will make the existing market failure worse. But would it really? The legacy carriers' own business models already severely limit network build out to neatly defined geographic and demographic market segments that can generate a return on investment in about five years.
The real challenge facing regulators isn't regulating the market. This is a market that needs stimulating and alternative business approaches that will solve the existing market failure and create a new telecom market to deliver the Internet protocol-based telecommunications services Americans need now and into the future.
Saturday, April 24, 2010
Paradigm shift in telecommunications underway
The FCC's current regulatory framework is more oriented toward PSTN than the Internet that is rapidly replacing it. It too is growing outmoded, leaving regulators struggling to devise a successor.
And as FCC Chairman Julius Genachowski has noted, the FCC also faces a major challenge in figuring out how to best address market failure that has left at least seven million U.S. households offline according to the FCC's own estimates. At a time when the PSTN is replaced by the Internet, if you don't have an "always on" terrestrial Internet connection, you don't have modern telecommunications service. As PSTN becomes obsolete, so does the PSTN means of Internet connectivity: dialup access that was state of the art nearly two decades ago.
This is truly a time of major transition in telecommunications. As with any major shift, there will be a tension between those who want to hang on to the old paradigm -- in this case the legacy single purpose "telephone" and "cable" companies whose business models are based on billing for incremental services delivered over closed, proprietary networks -- and those who want speed the shift toward alternative business models based on open access IP-based networks.
Friday, April 16, 2010
Fed up with circular debate over telecom market failure, British village acts to get broadband
While the UK government (just like America's) engages in a ridiculous circular debate over whether market failure has hampered the deployment of modern telecommunications infrastructure, the residents of Lyddington, Rutland have cried "bullocks!"and taken matters into their own hands.
No debate over market failure there, where according to this Telegraph article their petitions to the incumbent providers to bring them broadband got them nothing. So several local businesses are investing fiber optic cable that will bring the townspeople connectivity of 40 Mbs for £30 a month.
A key excerpt:
Dr Charles Trotman, head of rural business development at the Country Land and Business Association welcomed the project.
But he warned that not all local communities will be able to do it themselves and the next Government must put in place measures to ensure the whole country has superfast broadband.
"You cannot rely on the markets to do it because we know for a fact that large telecommunication companies will not invest in rural areas because there is no market return. If they are not willing to do it then someone has to do it and you have to have a central strategy set by Government"
Saturday, June 06, 2009
Private market failure limits U.S. broadband reach
“Today’s broadband networks are far from ubiquitous,” Kohlenberger is quoted as saying, noting only 57 percent of Americans have broadband at home, "and even that isn’t homogenous.” The nation, he said, is "at a juncture where we can and must do more to bridge this opportunity gap.”
Wednesday, July 18, 2007
Western Massachusetts towns called "a new kind of ghetto"
The Boston Globe published a story today reporting much of western Massachusetts exists in dial up purgatory with no broadband Internet infrastructure. The story includes a map that shows broadband availability -- and specifically the lack thereof -- in much of the Bay State.
"We have to make sure that all of Massachusetts is open to business -- not just the areas where it is easier or more profitable for certain companies to make available high-speed Internet access to their customers," said Stan McGee, the state's director of wireless and broadband development, at a budget hearing in March.
While communities wait for a statewide policy, they are using the resources at hand.
Tuesday, June 05, 2007
Why the private market fails on broadband
To be sure, the conservative faith in markets is amply justified in many areas where consumer choice leads to the best outcomes. No one is calling for a national iPod policy or for tax subsidies on Blu-Ray DVD players, for the good reason that these are consumer items that the market best allocates.
But broadband is different: market failures lead to it being undersupplied. The principle market failure is that the provision of broadband involves what economists call "positive externalities."
For example, the fastest broadband connections simultaneously support a host of digital video, voice, and data applications, like telemedicine. Yet the success of these applications is hindered by a classic "chicken or egg" dilemma: they will not develop without a market of high-speed broadband subscribers, but consumers need these applications as a lure to enter the high-speed broadband market in the first place.
So yes, conservatives are right. Proactive policies and incentives for more broadband might "distort" the market. But they are wrong in saying that this distortion would outweigh the benefits. In fact, the innovation and productivity spurred by more and faster broadband is likely to vastly exceed any minor losses from "misallocation" of economic resources.
Broadband has become the 21st century equivalent of a "chicken in every pot." Everyone is in favor it. But the real issue is not whether broadband is good and more is better, but whether the market alone will provide the right amount of it anytime soon. The OECD numbers suggest that we can do better. Now it's up to us to do so. We can start by crafting and implementing a proactive national broadband policy.