Broadband regulatory distress

I have genuine sympathy for telecom regulators in today’s market.

Many of them are faced with a true conundrum: how to stimulate investment in broadband networks in a brutal economy. On the one hand, competition is the best way to make sure consumers get the best broadband offerings possible. But on the other, the network infrastructure needed to provide that competition is costly, making it unlikely that multiple companies will be overbuilding one another to reach the same consumer market, especially in this downturn.

Some countries have addressed this issue with government mandates and subsidies — Japan, South Korea and some Scandinavian markets fall into this category. Their models may differ, but the attitude is the same — that broadband and, specifically, fiber to the home are too important to be left to private market whims.

But in “market economies,” the conundrum is deeper. Incumbent operators — always telcos and sometimes cable companies — are best-positioned to enhance their networks to offer new services but aren’t always quick to do so — especially if they think a regulator is going to force them to open up that network to competitors’ services.

Governments have recognized the role broadband can play in stimulating distressed economies. Broadband is a big part of the U.S. stimulus plan, and last week’s “Digital Britain” report acknowledges the role of broadband in aiding that country’s flagging economy.

Yet critics continue to snipe at the lack of solid policy for how best to spend money on broadband and who should get any subsidies that are offered.

I think Yankee Group’s Benoit Felten got it right when he said that the most important thing is to be decisive because the greatest danger is regulatory uncertainty. There are successful models of government action, as cited above, and there also is increased evidence that the market can and will succeed — if the rules are fair and unwavering.