Moving targets: Introducing mobility into universal service obligations

Structural changes in the economies of developing countries are leading to increased mobility of work and family life, and so an accommodating set of universal service obligations (USOs) implies new goals that extend beyond wireline telephone penetration and access. Wireless telephony penetration frequently exceeds wireline penetration in developing countries, and digital wireless platforms can incorporate Internet technology. This paper evaluates the history of telecom development in Mexico that has led to wireless telephony becoming the new consumption norm. The study takes the eMexico project as a case study of diversified USOs beyond wireline telephony. It considers potential obstacles to incorporating mobile phone and Internet (“Wireless Web”) services into Mexico's diversified universal service policy, including economic barriers to political mobilization over issues of telecom policy.     

Demand for telecommunication services in developing countries

Living standards and economic growth in developing countries are invariably linked to the availability and use of telecom services. Effective policy decisions require the best estimates of the drivers of these services. In this paper, telecommunications demand is estimated in models for residential mainline and mobile telephone service for developing countries for the period 1996–2003. The paper tests for cross-price effects between mainline and mobile service and its findings have important policy implications. It finds residential monthly price elasticity to be insignificant for developing countries, but the connection elasticity is larger than generally found in the literature. Mobile monthly price elasticities are very large. A new and important empirical finding is that although wireline phones are substitutes in the mobile market, the contrary is not true—mobile phones are not substitutes in the wireline market, and in fact may be considered complements. This lack of symmetry has important implications for properly defining telecom markets. Universal service subsidies and competitive market initiatives should be reevaluated in light of the paper's elasticity estimates. Increased competition, income growth and enhanced education may be the ultimate universal service promoters.     

Accelerating the development of Latin American digital ecosystem and implications for broadband policy

In the past ten years the Latin American and Caribbean region has been advancing in terms of various digitization metrics, such as the deployment of broadband infrastructure, and the adoption of the Internet and social media. However, despite the significant progress in terms of digitization of consumption,¹ the region faces still some important development challenges of its digital economy. This paper attempts to identify what the future challenges are for Latin America and the Caribbean, which raises a number of research and policy questions: (1) How close is consumer digitization in Latin America and the Caribbean to the levels observed in industrialized countries? (2) How should Latin America and the Caribbean address the broadband and Internet demand gap of the non-adopting population? (3) Are current digitization trends homogeneous across countries in the region or do we observe a divergence across countries, indicating some advanced nations approaching industrialized country performance, while others lagging? (4) If infrastructure and consumer adoption of certain digital products and services is evolving at a fast pace, what are the upcoming digitization challenges? (5) If broadband is a critical lever for the development of digitization, what are the policies to be implemented by Latin American and Caribbean governments to maximize investment for deployment of last generation technologies and promote adoption? To answer these questions the authors have developed, with support of CAF Latin American Development Bank, a comprehensive digitization index. This new index is used to assess the development of Latin America and the Caribbean region vis-à-vis industrialized countries. On this basis, an econometric model is developed to measure the economic development impact of digitization. Zeroing in on broadband as a critical lever for the development of the digital economy, a set of infrastructure investment and adoption goals is defined for different countries in the region. Finally, public policies are recommended to achieving the established goals.     

The digital divide problem: An economic interpretation of the Japanese experience

This study presents an economic analysis of Japan's attempt to address the geographical digital divide problem for broadband and mobile telephone services. To receive broadband service local inhabitants make voluntary contributions, which are matched by a municipal subsidy. The approach is effective in terms of economic efficiency and equity. Importantly, as fixed broadband service is provided locally the benefits are limited to local inhabitants. By contrast, mobile service is provided via a spectrum user fee system. That is, for mobile telecommunication services, no universal service fund exists. The underlying rationale is that subscribers are beneficiaries and commercial decision-making should be left to mobile operators.     

The mixed blessing of a deregulatory endpoint for the public switched telephone network

Receiving authority to dismantle the wireline public switched telephone network (PSTN) will deliver a mixture of financial benefits and costs to incumbent carriers and also jeopardize longstanding legislative and regulatory goals seeking ubiquitous, affordable and fully interconnected networks. Even if incumbent carriers continue to provide basic telephone services via wireless facilities, they will benefit from substantial relaxation of common carriage duties, no longer having to serve as the carrier of last resort and having the opportunity to decide whether and where to provide service. On the other hand, incumbent carriers may have underestimated the substantial financial and marketplace advantages they also will likely lose in the deregulatory process. Legislators and policy makers also may have underestimated the impact of no longer having the ability to impose common carrier mandates that require carriers to interconnect so that end users have complete access to network services regardless of location.This paper will identify the potential problems resulting from prospective decisions by National Regulatory Authorities (NRAs), such as the United States Federal Communications Commission (FCC), to grant authority for telecommunications service providers to discontinue PSTN services. The paper also will consider whether in the absence of common carrier duties, private carriers providing telephone services, including Voice over the Internet Protocol (VoIP), voluntarily will agree to interconnect their networks. The paper will examine three recent carrier interconnection issues with an eye toward assessing whether a largely unregulated marketplace will create incentives for carriers to interconnect networks so that consumers will have ubiquitous access to PSTN replacement and other broadband services.The paper concludes that private carrier interconnection models and information service regulatory oversight may not solve all disputes, or promote universal service public policy goals. Recent Internet interconnection and television program carriage disputes involving major players such as Comcast, Level 3, Fox, Cablevision and Google point to the possibility of increasingly contentious negotiations that could result in balkanized telecommunications networks with at least temporary blockages to desired content and services by some consumers.     

Market Structure and Broadband Internet Quality

This paper investigates the effects of the number of firms and their product‐type on broadband Internet quality. We estimate a model that relates the actual speeds delivered, in census block groups to the number of wireline and wireless internet service providers (ISP's), cost and demand conditions, and correction terms for the endogeneity of market structure. Model estimates show four main findings. Wireline speeds are often higher in markets with two or more wireline ISP's than with a single wireline ISP. Excluding the correction terms from the analysis understates this effect. Increases in wireline speeds are larger in the upstream direction, and there is no relationship between wireline speeds and the number of wireless ISP's.     

Economics at the FTC: Deceptive Claims,Market Definition,and Patent Assertion Entities

In 2015, the Federal Communications Commission (FCC) imposed common carriage regulation—so-called Title II requirements—on previously unregulated broadband Internet service providers. The regime shift was premised on the FCC’s findings that such rules had demonstrably yielded economic gains. This paper evaluates the FCC’s empirical arguments and finds them uncompelling. Adjustments for inflation or general economic trends eliminate the effects cited by the FCC. Moreover, contrary to the Commission’s assessment, mobile services and broadband markets have shown notable growth in response to deregulatory events that reduce Title II requirements.     

The Internet of Things as an accelerator of advancement of broadband networks: A case of Thailand

The advanced development of broadband access is an inevitable step toward supportive daily lives and sustainable economic growth. However, the decisive outcome of the development relies heavily on the demand side. Consumer choice among advanced Internet broadband technologies will determine the achievement of the development. This study aims to illustrate that consumer decisions on choices of advanced Internet access are influenced by the emergence of the Internet of Things (IoT) applications. A bivariate probit model is applied to examine the effects of IoT, consumer's individual characteristics, and their current use of networks on their decision pertaining to the choice of advanced Internet access. Using Thailand as a case study, the result indicates that the emergence of IoT applications accelerates the adoption of both advanced mobile broadband (5G) and advanced fixed broadband (FTTH). This finding may help policy makers to optimize the future direction of the Internet infrastructure development in Thailand, and also countries in a similar stage.     

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.     

A layered United States Universal Service Fund for an everything-over-IP world

Support through the United States Federal Universal Service Fund for high-cost areas has been principally defined in terms of telephone service. Fund growth due to increases in wireless lines and implicit support for broadband infrastructure has created an untenable situation, and fundamental reform is expected. The cause underlying this growth is convergence between the telephone network, wireless networks, the Internet, and cable networks. This convergence will pose additional serious long-term challenges to the fund. This paper proposes a restructuring of the high-cost funds based on a layered model. Both contributions and distributions are focused on network infrastructure, without distinction between voice and broadband. The proposal uses a new definition of communication services to guarantee technology neutrality, and includes service area reform and cost efficiency measures. This layered approach repositions the fund for future converged networks.     

Recent developments in US wireline telecommunications

This article presents a selective survey of several recent developments in the US market for wireline telecommunications services spanning the 2003–2005 period. Specifically, the article discusses the recent decline in overall telephone penetration rates, the substitution between wireline and wireless telephony, intermodal competition issues raised in the context of the FCCs review of the Cingular/AT&T Wireless merger, and the potentially anticompetitive effects of incumbent local exchange carrier tying of voice and DSL service. The article identifies several areas for future research motivated by each one of these developments.     

Internet telephony: Costs,pricing, and policy

This article analyzes Internet Service Provider costs and regulatory and policy issues raised by Internet telephony. Transport and non-technical items such as customer service, sales and marketing, represent a substantial portion of an ISP’s costs with Internet telephony. Pricing models and yield management techniques supporting Internet voice services might be employed for other Internet differentiated services as well. An integrated regulatory framework will be required, because of convergence, to formulate policies for multimedia services. We conclude that governments should develop appropriate policies without introducing economic and technical distortions into the nascent Internet telephony market.     

Avoiding the Pitfalls of Net Uniformity: Zero Rating and Nondiscrimination

The current debate over network neutrality has not fully appreciated how service differentiation can benefit consumers and promote Internet adoption. On the demand-side, service differentiation addresses the primary obstacle to adoption, which is the lack of perceived need for Internet service, and reflects the growing heterogeneity of consumer demand. On the supply-side, monopolistic competition has long underscored how product differentiation can create stable equilibria with multiple providers—notwithstanding the presence of unexhausted economies of scale—by allowing competitors to target subsegments of the overall market that place a higher value on particular services. Conversely, prohibiting service differentiation would restrict competition to price and network size, which are factors that favor the largest players. These dynamics are well illustrated by global enforcement patterns with respect to a practice known as “zero rating”, which permits subscribers to access certain content without having that traffic count against their data caps. Of the six countries that have brought enforcement actions against zero rating, only India has categorically banned the practice. The other five countries (the United States, Chile, Canada, Slovenia, and The Netherlands) have adopted a more nuanced approach. A case-by-case approach is consistent with the empirical literature on vertical integration and restraints and the well-established principles for determining when to impose per se illegality and when to apply the “rule of reason”. The U.S. Supreme Court’s antitrust jurisprudence also helps identify factors that militate against liability, such as the lack of market power, nonexclusivity, and nonproprietary services.     

Development of telecommunication and broadcasting infrastructure indices at the global level

The importance of information and communication technology (ICT) in economic development has been increasing rapidly along with the Internet and mobile telecommunication networks. ICT development is becoming a main growth factor of many countries. As they realize the importance of the ICT industry, developing nations work to catch up with established economies. Therefore, many nations are formulating an ICT-enhanced policy. This paper introduces a number of telecommunication and broadcasting sub-indices, which include the fixed telephone network, the Internet, and mobile networks, which are aggregated into a composite Telecommunication Index (TI). The indices are computed using principal component analysis and human development type index methods. The country rankings, by different ICT-related indices, help identify the strengths and weaknesses of infrastructure development such that each country can foster economic growth. The performance of TI is compared with several other indices, such as the digital access, human development, and ArCo technology indices. The type of indices affects the country ratings. Results suggest that the parametric index approach may be preferred over those methods in which the subjective weighted summation of normalized variables used (non-parametric indices).     

The Demand for International Message Telephone Services: A Two-Stage Budgeting Model

This paper examines demand for international telephone services. Using panel data covering 57 routes over 6 years, a model featuring a two-stage budgeting process and product differentiation is implemented for empirical estimation. A range of economic, social, cultural and technological variables are included in the aggregate-level model to study overall demand. The unique and rich data offers an opportunity to examine the impact of new technology innovations such as Internet on traditional telephone services. The company-level model incorporates product differentiation and uses the Almost Ideal Demand System to simultaneously estimate demands for and competition between carriers.     

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.     

Access to and penetration of ICT in rural Thailand

This paper presents an econometric study of information and communication technology (ICT) in all 70,000 rural villages in Thailand, where the ICT considered consists of fixed-line telephone service, mobile telephone service, public telephones, computers, and Internet service. The results may provide information that helps policymakers decide where to put limited resources to promote ICT, and helps profit-seeking ICT companies target regions that maximize revenues. The study found that education is far more important than income in predicting the percentage of households who adopt ICT services, and that some unexpected variables such as the penetration of pickup trucks are useful predictors as well. Even in areas where fixed-line phone service is available, 70% of households with computers choose not to become Internet subscribers, although many presumably have enough money and technical knowledge. By separating availability from penetration of ICT, the study found that they can have different predictors, which means that researchers who do not separate them may get misleading results. There is no evidence showing mobile telephone service as a substitute for fixed-line telephone service. Also, public telephone service had little or no impact as a substitute for fixed-line or mobile telephone service, so phone companies need not fear that deployment of more public telephones will decrease their subscribership. Finally, there appears to be significant unmet demand for telephone service in rural Thailand where the infrastructure does not yet exist.