Recently, I was in South Korea, attending the OECD's Ministerial on the Future of the Internet Economy. Rather than try to give a blow-by-blow account, I've tried to package some of my thoughts in a series of posts. Here's one:
A few days ago, I picked on Chairman Martin's speech at the plenary session of the OECD Seoul Ministerial. Among the various deregulatory policies Martin cited as enhancing competition (and thus the United States' position in terms of broadband pricing and deployment) was the removal of unbundling requirements for broadband.
Martin used the removal of unbundling requirements as one of many examples in creating a (false, I think) dichotomy between competition and regulation.
This is odd, because unbundling is a keystone of broadband policy in Europe—precisely because unbundling is a pro-competition regulatory measure. No, that's not an oxymoron.
Let me back up a bit. In order for consumers to have broadband access to the Internet, they pay for Internet service from an ISP. That service provider, in turn, buys the use of the network from a network provider—someone who owns the cable and fiber in the ground. Now, there's a lot of vertical integration in this—a network provider doesn't have a lot of incentive to sell the user of the lines to a competitor who could undercut them on prices or take away customers by offering better services. Unbundling regulations required network providers to sell that usage at reasonable rates, to prevent such anticompetitive behavior.
Now, Martin seems to view regulation as prima facie anticompetitive. But leaving aside the falseness of this dichotomy, let's consider the fact that a competitive marketplace is not the only goal of good broadband policy. After all, we encourage competition in a variety of markets not because we all like a contest, but because competition leads to efficient allocations of resources, leading to lower prices and increased access to products and services by the people who want them.
So if access and affordability are the ends served by competition, let's ask if these ends are met by Martin's version of competition—one without unbundling regulations.
As a comparison, we can look at a number of the other OECD countries—keeping in mind that unbundling is largely the norm. As of June 2007, the US, lack of unbundling regs and all, ranked 15th out of 30 OECD countries in terms of broadband penetration. Even in some countries that have less penetration, those that have recently introduced unbundling can point to massive increases in penetration soon after.
As for cost? By October of last year, the US ranked 13th out of 30 for the cost of broadband as measured against GDP per capita, with many of the same countries that beat us out in terms of penetration also winning in affordability.
So why, in spite of this, is Martin still touting the removal of unbundling requirements as a success? While a skepticism of regulation is a perfectly healthy theory, a quick glance at some of the facts seems to suggest that in this case, that theory isn't working out in practice.