Can open internet access be imposed upon European CATV networks?

Broadband over cable television networks has become a growing force on the retail market in the EU. Thus, a debate has always been raised whether cable television networks should also be subject to open internet access obligations as PSTN and fibre. This article aims to share its view from a legal perspective. In order to do so, it conducts a survey of the current regulatory measures on broadband over cable television networks within the 27 EU Member States, and then carries out an in-depth legal analysis on Member States that attempted to regulate broadband over cable television networks. The conclusion is that broadband over cable television networks is currently deregulated, and will probably remain so in the future.     

Can evidence of pricing power help market power assessment? Broadband Internet in Ireland and the Netherlands

This article proposes a simple hedonic price test to assess whether firms may have pricing power. The test allows NRAs to compare prices of providers of differentiated products on a like-for-like basis. Testing for pricing power could be a useful complement to market share analysis. This is especially the case in market reviews periodically undertaken by European communications regulators. As an illustration the test was applied to broadband Internet access services in Ireland and the Netherlands. Results appear encouraging as they are broadly aligned to the decisions of the regulatory authorities in both countries that the incumbent DSL operators had market power at the time.     

Rural broadband: The provider matters

As broadband use has grown over the past few years, scholars and policymakers have turned some of their attention to the urban-rural broadband divide. While existing research offers important insights into this divide, no research has fully explored the differences in broadband deployment patterns among various types of telecommunications providers, including both large and small telephone and cable providers. Through data collected from interviews with telecommunications company representatives, this research assesses the extent to which different types of providers are deploying broadband in urban and rural areas. The interviews are also used to ascertain factors shaping the broadband deployment decision-making process for different types of providers. Both the quantitative and qualitative elements of this research demonstrate clear patterns among different types of providers in relation to rural broadband deployment, as different types of companies are influenced by somewhat unique regulations, competitiveness concerns, resource levels, and existing infrastructure conditions.     

Net neutrality and market power: The case of South Africa

Net neutrality rules have been implemented in many developed countries, often in response to concerns over network operator market power and potential blocking or throttling of content. However, developing countries typically have significantly lower levels of internet penetration and usage. Market power in respect of internet access looks quite different given that mobile is the predominant means of connection and there are often three or more mobile operators. In South Africa, there is a quasi-monopoly in the paid satellite broadcasting market and broadband providers zero-rating content from third parties (such as Netflix) may bring about more competition. We test the main theories of harm arising in the net neutrality debate, including network operator market power and exclusion among content providers using data on the number of announced prefixes and peers and IP addresses and considering examples of bundling and zero-rating conduct by operators. We find that net neutrality rules are less likely to be required in South Africa and other developing countries and that strict enforcement of such rules could in fact hinder competition in markets for content, telecommunications networks and other related markets.     

Cable television and competition : Theory, evidence and policy

There is currently widespread discussion in the USA of the merits of amending legislation to allow competition in the cable television market, notably from the telecommunications companies. This article explores what economic theory can contribute to this debate, and adduces empirical evidence on the effects of competition in the cable market where it presently exists. The authors conclude that blocking entry into cable, and indeed into telecommunications markets, is likely to be poor policy, and that increased competition would foster the development of an efficient modern broadband network.     

The FCC’s Net Neutrality Decision and Stock Prices

More than a year after a court invalidated its “net neutrality” rules on broadband Internet service providers (ISPs), the Federal Communications Commission (FCC) decided to extend public-utility (Title II) regulation on broadband services. This paper uses traditional event analysis of the movements in the values of major communications and media companies’ equities at key moments in the FCC’s path to this decision to estimate the financial market’s assessment of the likely effects of regulation on ISPs, traditional media companies, and new digital media companies. The results are surprising: the markets penalized only three large cable companies to any extent, and even these effects appear to have been short-lived. The media companies, arguably the intended beneficiaries of the regulations, were unaffected.     

Diversification of cable television firms into broadband products

This research provides a new perspective to investigate the broadband diffusion in eight states of the U.S. by studying the two-stage entry decisions, namely, upgrading and subsequent product decisions, by the cable television system operators, one of the early dominant players in the broadband market, and examines the role of competition, market characteristics and firm heterogeneity in the cable company's decisions in a dynamic setting. Comparing the empirical results of the decision models of both stages can give new insights into the dynamics of broadband diffusion. The empirical results show that the subsequent product decision is affected more by the demand determinants, while the upgrading decision is affected more by the cost determinants. The results also indicate that policies which aim to reduce the entry cost such as a low city fee can largely encourage firms to upgrade the network, while subsequent policies that help boost the demand can help firms diversify into new digital services early. The effectiveness of competition policy in the broadband diffusion is confirmed in both stages. Strategic responses by cable firms to the presence of RBOCs are more noticeable in the second-staged product decision than in the first-staged upgrading decision.     

Unbundling and infrastructure competition for broadband adoption: Implications for NGA regulation

The common idea of open access policy is that it refers to the sharing of particular elements, such as wholesale access networks, backhaul, under-sea cable and internet exchange points in fixed and mobile networks. In broadband networks, the use of open access policy usually refers to the infrastructure parts, which are considered a bottleneck. Many regulators have generally focused open access policy on fixed broadband networks, especially digital subscriber line (DSL) technology, in the last decade. Local loop unbundling (LLU) regulation is one of the main strategies for the regulator to open access to an incumbent’s bottleneck network in order to soften its monopoly power and encourage competition in the DSL broadband market. The OECD countries have different strategies regarding unbundling local loop and infrastructure competition, as the characteristics and infrastructure networks of countries vary. There are currently more choices of next generation network (NGN) technologies to develop. While local loop unbundling may not be applied fully to NGN development (the cost is not sunk, more technologies are available to implement, incentive of investment by operator), it can indicate benefits and drawbacks of open access policy in the past decade that can be adapted to NGN.The empirical results of this study show that during 2002–2008, LLU regulation was one of the strategies used to increase broadband adoption in countries that had difficulty encouraging infrastructure competition. Unbundling regulation can therefore be implemented carefully and differently in each country that has inefficiency that is harmful to consumers in its market from a monopoly incumbent. Infrastructure competition, on the other hand, is introduced as another strategy to increase broadband adoption. The empirical results of this study indicate that infrastructure competition can be used as a strategy when there are already enough infrastructures in the area or country. These results support the idea of using open access and infrastructure competition policy depending on the existing competition of broadband infrastructure in each country.     

Infrastructure investment on the margins of the market: The role of niche infrastructure providers in the UK

Across Europe, policymakers and market forces are striving to deploy next generation access (NGA) networks and ensure ubiquitous access to superfast broadband services. Due to scale economies and sunk costs, the roll-out of NGA is expected to be profitable only for large-scale providers and in densely populated areas. Nonetheless, alternative providers, such as utilities and local communities, have significantly contributed to NGA diffusion in many countries. Over the past five years, several small-scale initiatives have emerged in the UK, bringing fibre networks to urban and rural areas previously overlooked by either commercial or subsidised deployments. A multiple case study approach is employed here to explore the nature and the drivers of niche providers in the UK NGA market. All these initiatives are demand-driven and to follow a modular approach. Despite adopting different business models, they all rely on the resources inherited from past broadband initiatives and relationships with local partners. By investigating the strategies of niche providers in NGA market, this analysis sheds light on their contribution to bridging the digital divide in the UK and is presented as a preliminary assessment of their sustainability and potential growth.     

Municipal electric utilities’ role in telecommunications services

Municipal electric utilities (MEUs) are increasingly expanding into telecommunications services. Such entry is interesting in several respects. First, MEUs marry two potential pathways for the growth of telecommunications access infrastructure and services: public ownership of last-mile facilities and electric power company expansion into telecommunications. Second, municipalities are key early adopters of next generation access technology in the form of both fiber-to-the-home (FTTH) and broadband wireless (e.g., WiMax) systems. Third, MEUs are at the nexus of the debate over the proper role for local government in promoting broadband Internet access. Most homes in the United States are served by investor-owned local telephone and cable television providers, using company-owned wireline infrastructure. These providers have generally opposed municipal entry, arguing that it will crowd out private investment and represents an unfair and less efficient form of competition. A number of states have acted to limit—or in some cases—to promote such entry. Before engaging in this debate, it is necessary to have a clearer picture of the current state of municipal entry and the local demographic, cost, industry, and policy factors that influence its evolution. To address this need, this paper reports the results of an empirical analysis of MEUs that provide communications services to the public. This analysis shows that MEUs are more likely to offer such services if they also provide internal communication services to support their electric utility operations (scope economies); are relatively close to metropolitan areas (lower backhaul costs); are in markets with fewer competitive alternatives (cable modem and DSL service availability limited); and which are less encumbered by regulatory barriers to entry (in communities in states which do not restrict municipal entry into telecommunication services). Of these results, the competitive impacts are the least straight-forward to interpret, suggesting richer dynamics and avenues for further research.     

Estimating broadband diffusion in the EU using NUTS 1 regional data

In this paper we use panel data on NUTS 1 regional data for 27 EU countries in the years 2006–2010 to analyze determinants of broadband diffusion. We estimate both linear demand specification and the logistic diffusion function. We find that, after controlling for regional differences due to socioeconomic factors, inter-platform competition approximated by an inter-platform Herfindahl index has a significant positive impact on broadband diffusion. Broadband deployment is lower in countries in which DSL has a greater share in Internet access and it is higher in countries in which cable modem has a greater share in Internet access. Moreover, we find that competition between DSL providers has a significant and positive impact on broadband penetration. First, higher prices for a fully unbundled local loop connection, which represent the cost of providing copper-based Internet services, have a significant and negative impact on broadband penetration. Second, a greater incumbent share in DSL connections has a significant and negative impact on broadband penetration.     

Non-discrimination rules for ISPs and vertical integration: Lessons from cable television

The experience of cable television indicates that vertically integrated ISPs have plausible incentives to favor their affiliated content and to restrict entry of nascent rival content services, but these incentives are weakened in some respects, and strengthened in others, by differences in the economic architectures of cable and Internet broadband. Non-discrimination regulations designed to control such behavior are potentially more effective than in cable, but rules governing discrimination both in the upstream access and the downstream retail markets (as the FCC's no-unreasonable-discrimination rule appears to do) are likely to be necessary for effectiveness. Beneficial effects of vertical integration on financing and entry of cable programming networks should also apply to Internet video content development, but emergence since the 1970s of a robust programming supply industry with few vertical ties to cable suggests that such benefits will be less significant in the ISP case. Finally, the history of both the cable and ISP industries makes evident that the fundamental policy concern should not be vertical integration but horizontal market shares of ISPs, both at the local and national levels.     

The involvement of utilities in the development of broadband infrastructure: A comparison of EU case studies

Energy companies and other utility providers have been often involved in the provision of telecommunications services. Nevertheless, their contribution to broadband development has varied significantly over time. In the late 1990s, both local and national utilities in the European Union (EU) engaged in the provision of broadband networks, but only few of them managed to establish themselves as major broadband providers. More recently, new projects involving national utilities have been announced in several EU countries, opening new scenarios for utilities’ contribution to Next Generation Access (NGA) development. This paper identifies and explores the factors affecting the entry and the success of utilities in the EU broadband market, through the comparison of four case studies from four EU countries (Germany, Italy, Sweden and the UK). The evolution of utility involvement in the EU broadband markets is assessed against the interaction of market, technology and policy factors, focusing on the impact of policy and regulatory measures. As a result, this paper provides fruitful insights into the relevance and effectiveness of public interventions in broadband markets. Across the four case studies, public support and public ownership emerged as the main drivers for the involvement of utilities in EU broadband markets, with regulatory measures and economies of scope exerting a limited and decreasing influence. However, the contribution of utilities has varied significantly across the cases studied, reflecting the different approaches taken at national and local level to support broadband development, in spite of the common regulatory framework.     

The Market Structure of Broadband Telecommunications

The recent growth of the Internet is creating markets for broadband telecommunications networks. In the past, virtually all such 'infrastructure' networks have been subject to government regulation. Two reasons advanced for this market intervention are (i) such networks constitute a natural monopoly, and (ii) to achieve 'universal service', in which all citizens have access to services. In this paper, we develop a model and estimate it using engineering data which tests if these two hypotheses are likely to obtain for broadband networks. We find that oligopolistic competition is likely to emerge for demand levels approaching that of today's cable television.     

Regulatory options for cable TV in the UK

In this article the alternative methods of regulating the cable TV industry are compared in terms of efficiency and consumer welfare. The effectiveness of each regulatory option in limiting any market power that cable operators may be able to exercise is considered in a framework which recognizes that both the market and government regulations are imperfect, costly and often do not operate in the public interest.     

“Open access:” the ideal and the real

“Open access” would allow ISPs to use a cable operator's broadband connection under regulated terms and conditions. Advocates stress the desirability of an “end-to-end” architecture for the Internet and the danger that cable operators will use their control over the last mile to limit consumer choice and stifle innovation. Opponents contend that wholesale price controls and other regulatory burdens under what they term “forced access” would in fact slow down the deployment of broadband, stifle innovation and harm consumers. The fears of “open access” advocates seem largely speculative at this point. Evidence from related policies also favors the opponents. “Closed” cable systems are beating their “open” DSL competitors in the market place; analogous regulation of cable TV did not serve consumers well; and forced “unbundling” of local service has been controversial and largely ineffective. In addition, relevant technology stocks declined in price with political and legal victories for “open access” and increased when it suffered setbacks.     

Wholesale market definition in telecommunications: The issue of wholesale broadband access

The scope of a wholesale market may, in addition to demand- and supply-side substitution at the wholesale level, also be determined by substitution patterns at the retail level. Considering wholesale broadband access markets, it is argued that each of these forces can be strong enough to render a 5–10% price increase by a hypothetical monopolist at the wholesale level unprofitable and thus may lead to a wider wholesale market definition including, for example, cable networks in addition to DSL. Based on the theory of derived demand elasticities the paper discusses under which circumstances this could be the case. The position of the European Commission and the practice of national regulatory authorities are then reviewed in light of these arguments.     

Innovation patterns and policy implications of ADSL penetration in Korea: A case study

Korea has been leading the world in broadband Internet access services since 1999. Based on an in-depth case analysis of the penetration of asymmetric digital subscriber line (ADSL) in Korea, the present study explores the patterns of decision making and interactions among key innovation actors, such as the government, Internet service providers, equipment providers, and content providers, using a conceptual framework wherein models of innovation systems and decision making under uncertainty are combined. The results revealed that the Korean government played a pivotal role in the creation of the ADSL-based Internet service market by providing a strong vision for this emerging service, building a coalition among various key actors, and stimulating initial market needs and supply of necessary equipment during the early period of higher uncertainty. As the level of uncertainty decreased with market evolution, however, the role of industrial actors and their market competition became more important to the rapid growth of the ADSL market. Based on these findings, policy and managerial implications are proposed.     

Regional differences in residential demand for very high bandwidth broadband internet in 2025

The future demand for data and the role of gigabit networks are central issues in the context of Next Generation Access (NGA) network roll-out. Based on a generic model, which allows to predict unconstrained future broadband demand in different regions and countries, the authors compare the results for Germany, the UK and the Flemish region, and discuss reasons for the different outcomes. The generic market potential model thereby allows to project the future demand for bandwidth from residential customers on the basis of applications and their bandwidth needs, user profiles and population structure on a household level. Despite a general trend towards an increasing need for broadband, there are clear differences. On the one hand, these point to the relevance of socio-demographic factors for broadband adoption. On the other hand, the relatively high proportion of refusals shows that there is still a need for further educational work on the part of public authorities and providers. Finally, it has to be stated, that our forecast relies on the assumption that connectivity and thus that the availability of area-wide gigabit capable broadband access does not represent a bottleneck.