Public Knowledge just filed comments urging the FCC to pay close attention to a study (PDF) it commissioned on broadband unbundling. The study, written by Yochai Benkler and his team at Harvard’s Berkman Center, examined international broadband regulatory practices.
This was not just another study chronicling the United States’ decline in Internet prowess. Instead, the Berkman Center team examined broadband markets in a number of different countries. They then tried to figure out what types of regulatory policies were the most effective at increasing broadband penetration and access. Basically, the study tried to figure out why the United States was falling behind.
What they found should not surprise regular readers of this blog: creating conditions for real competition between broadband providers benefits consumers. Not only that, but it encourages the construction of the infrastructure required to bring true high-speed Internet to more people. Wide reaching broadband penetration stimulates innovation and the economy. It allows people to start businesses and hire workers, which creates jobs and opportunity.
The study found that one of the most important elements of successful broadband regulation is something called “unbundling.” Although unbundling comes in a number of different flavors, the central idea is fairly straightforward: the people who own the physical broadband infrastructure (wires, switches, poles) are different from the people who offer consumers broadband services. This allows companies to compete to bring broadband to consumers without having to build expensive and unnecessary duplicate networks.
Today, the company that offers you broadband probably owns the wires used to bring you that broadband. For example, Comcast is a broadband provider and Comcast also owns the cables used to connect a house to the Internet. That has not always been the case with the Internet. In the dial-up Internet era, the companies that owned the physical infrastructure (phone lines) did not directly offer Internet service. Instead, a host of other companies could use that infrastructure to offer consumers Internet. This is why you could choose among AOL, Prodigy, CompuServe, and thousands of other competitive ISPs in the dial-up era, but are basically locked into your cable (or phone) company in the broadband era.
Public Knowledge urged the FCC to apply these types of open access unbundling requirements on today’s broadband providers. Imagine if a bunch of companies could get access to the cable company’s wires at a wholesale rate and use it to offer consumers broadband internet. These companies would compete with each other, giving consumers real choice in broadband service. Of course, there is no reason to limit the benefits of unbundling to cable – all of the mechanisms used to access the Internet (cable, DSL, wireless, fiber) should be forced to unbundle. That way, consumers will have real choice in broadband providers no matter how they want to access the Internet.
Also, in case you are curious, Benkler’s own comments about the study can be found here.
Unbundling Won't Happen, Even Though It Should
Unbundling has been around for years, in all the essential public utilities. Its purpose arises because the facilities in question are a monopoly in one way or the other, and must be unbundled in ways that allow multiple providers to use them, to provide competing services that flow over the single, physical facility being shared under unbundling.
Unbundling is an alternative to regulation of providers who own both the physical infrastructure and the services that flow over it, presumably to introduce more competition and incentives designed to replace regulation.
However, unbundling failed miserably to provide the competition for telecommunications services promised under the Telecommunciations Act of 1996 (even while succeeding by accident in the opposite direction, for dial-up ISPs).
The major Regional Bell Operating Companies (RBOCs at the time), exploited the concept of unbundling to lure in legislators to pass the Act, with major deregulation, then turned around and killed off the Competitive Local Exchange Carriers (CLECs) who spent millions to invest in unbundled facilities, after which the RBOCs essentially reformulated themselves with mergers into two giant, heavily deregulated RBOCs.
Given the failure of deregulation to create effective unbundling and provide the intended competition in the US, it’s even more unlikely to go in the opposite direction, where re-regulation would be necessary to achieve unbundling and the corresponding competition.
There’s no way they’re going to give up the lock they have on the content markets, which also provides them with a war chest full of lobbyists to fend off any possible regulation.