Does Biden’s plan solve the competition conundrum?
Tuesday, February 08, 2022
By Ben Bawtree-Jobson – CEO
President Biden has said before that “capitalism without competition is not capitalism; it’s exploitation”, which is true across many industries. Dominant tech, healthcare and pharmaceutical firms, for example, can prevent rivals entering the market because of the lack of regulation on healthy competition. This stagnates economic growth and consumers end up, quite literally, paying the price. In telecommunications, privately funded open access networks will play a vital role in fostering healthy competition.
Biden’s $65 billion fund for broadband for all is certainly necessary to help drive investment in fiber infrastructure, keeping previously underserved communities connected and allowing for the expansion of smart cities. In fact, the Benton Institute for Broadband and Society has called Biden’s investment the biggest in broadband deployment ever, and with good reason. It will provide subsidies for ISPs to build in underserved areas and will help fund the Broadband Benefit Program, giving eligible households up to $30 a month to pay their broadband bill. But will it promote competition in a market stifled by unregulated monopolies.
The short answer is no. Traditionally, service carriers have owned and operated their network infrastructure, meaning that millions of citizens, especially those who live outside urban areas, only have one choice of provider. A monopolistic market culture like this ultimately dictates high prices and deprives consumers of choice. It has historically led to disinvestment in low-income neighborhoods where the high cost of building and running a fast fiber network does not generate a quick enough ROI.
There is no denying that Biden’s investment is needed, with poor broadband being a root cause of the digital divide. However, even with this funding, vast swathes of the US will be left unserved, and the market will have to make way for private capital.
Private capital isn’t a bad thing because it opens the market up for emerging ISPs to breakthrough. But problems will arise if the market doesn’t change its monopolistic ways. Even consumers who have access to high-speed internet and cell phone service will be burning holes in their pockets to stay connected. So, what is the solution to the competition conundrum?
Competition and the digital revolution
While there are many pieces to the telecoms puzzle, one answer could be to rely on open access networks. The open access model allows multiple carriers to operate on a single infrastructure, constructed and maintained by a private wholesaler. The presence of multiple service providers fosters healthy competition, disrupting monopolies and giving smaller ISPs the chance to emerge. The network itself will run by every home and business in a town, giving consumers access to high-speed connectivity at a price and package that is suitable for them.
It may sound like a big undertaking but ultimately, it is much more convenient and sustainable than building separate networks for each service provider. On top of that, open access is cost-effective for municipalities and ISPs alike. By promoting competition, you allow natural market conditions to provide customers with the products and services they desire and at the prices they can afford, so that people will be less dependent on initiatives such as the Broadband Benefit Program. This model is also cost effective for ISPs, who can access a larger pool of customers without investing more capital. Now, enough about the money. What about the social benefits?
Allowing social prosperity
Competitive fiber networks will enable public services to be more accessible to communities hindered by the digital divide. Affordable tariffs and good connectivity will create better access to online education, e-health services and remote working. While large percentages of the US workforce are now adopting flexible working policies, more citizens than ever before are relying on their home broadband to keep up productivity and connect with their colleagues. If they can do this efficiently with high-speed fiber optic, businesses can continue to thrive, expand and recruit talent from further afield.
It’s true that Biden’s proposed $65 billion broadband infrastructure investment will go some way to solving America’s internet woes. It can tackle the social disparities that have plagued the US for years while paving the way for smart city applications like improved emergency services communications and efficient traffic management.
But the question of whether it will stretch far enough persists. Simply subsidizing ISPs to build the infrastructure themselves is a drain on the finances and won’t guarantee fiber upgrades in some areas. Not only does open access solve this issue, but it promotes the competition needed to for the sector to grow and innovate.