What Would Broadband Competition Look Like?
from the what-if-Net-Neutrality-were-a-foreign-concept dept
The Reverse MVNO
There has been a big trend towards MVNO carriers in the mobile space - that is, carriers who are Mobile Virtual Network Operators, and don't actually operate their own cellular towers, spectrum, and network. These MVNOs outsource that part of the business to the big cellular operators as wholesale buyers, and focus on the marketing, the handsets, the retail, the billing, and the services. But in telecom these days, it's highly desirable to offer bundles of services, mixing fixed, mobile, Internet and TV packages to drive up total revenue and customer loyalty. Thus, it's interesting to note the start of a new trend, the FVNO, where the F is for Fixed. In the UK, O2 mobile has decided to expand their business into the fixed telecom sector, and is doing so by reselling the infrastructure of BT (British Telecom) under their own brand.
On Broadband Competition
Aside from the quirk of building MVNOs backwards, the shift is notable for readers here in the US, because it is illustrative of the kind of competition that can result when incumbent players are required to wholesale their fixed assets. O2, now owned by Spain's Telefonica, was a wireless-only company, but already offers fixed broadband to enterprise customers using BT's all-IP "21st Century Network". This move is indicative of a market where new entrants are free to launch, consumers have a wider range of choices, DSL speeds are faster, and yes, prices end up lower. So how exactly is that telco-cable duopoly working out for us in the US?
American readers not yet upset with the state of broadband in the US should feel free to click any of the links in the preceding paragraph to see the effect that competition has on a market. It makes all the players better, and offers huge benefits to consumers. The USA had exactly the same kind of competition codified into the Telecommunication Act of 1996. The act required incumbents to share their last mile through a regulation called UNE-P. UNE-P had some early effects: You may remember DSL upstarts that sprang onto the market like Speakeasy or Covad. But our UNE-P lacked teeth, and the incumbents were able to charge much higher wholesale prices than in Europe, where competition picked up steam. So by 2005, instead of re-enforcing UNE-P in the Telecom Reform Bill, your Congress killed it completely. In this article, Masnick talks about how it mattered little, because the wholesale price was sabotaging the effort anyway.
On Net Neutrality
So now here we are in the US in 2010, still debating Network Neutrality. Does it look like "Net Neutrality" regulation is necessary in the UK? Heck no. Competition has completely obviated the need for Brits to regulate. Regulation is only necessary when monopoly powers are in effect, and the free market can't push Supply to offer what is in Demand. And what of the doomsday outcomes incumbents predict if they are forced to share assets? Did BT fall apart? Go bankrupt? Stop investing in any new infrastructure (as lobbyists say is the obvious outcome.) No! They became global leaders in rebuilding, investing, modernizing infrastructure, and launched the all-IP 21Century Network! BT became very good at wholesale as well as retail. Competition made every UK stakeholder better. So why don't we Americans forget Net Neutrality: Let's focus on bringing competition back to the US market. Our duopoly experiment has failed (surprise, surprise), the European examples are crystal clear. This debate is no longer theoretical.
Filed Under: broadband, competition, net neutrality
