Tuesday, November 2, 2004 - The Progress & Freedom Foundation Blog

Details, details . . .

Notwithstanding election-eve efforts to weave a gripping narrative about how trying to promote broadband by minimizing regulation effectively denies these services to many consumers, third quarter results from several broadband providers suggest that such a tale would be a gross oversimplification of this policy's impact, or would just be plain wrong. As the proffered story goes, the failure of business-biased policymakers to regulate large cable and DSL providers transforms them into evil monopolists or duopolists hell-bent on raising or keeping prices artificially high, which in turn dissuades hapless consumers from subscribing.

But providers' third quarter results, as reported late last week in the Wall Street Journal Online [subscription required], remind us that reality is often more complex than fiction. A major DSL supplier cut its price -- already on the low end of broadband prices nationally -- in the hopes of stealing more customers from rival cable modem providers. A cable modem provider attracted a record number of new subscribers without emphasizing price cuts, relying instead on its product's growing appeal to consumers. And both providers emphasized (along with another DSL provider) the importance of their overall suite of services (e.g., voice, Internet access, video, etc.) in attracting broadband customers.

One could lament that these and similar developments over the course of broadband's brief history do not resemble some idealized notion of telecom markets based on decades past; in that outdated vision, competition turns heavily on price because product offerings are more akin to stable commodities about which consumer preferences and demand patterns are clear and well-established. Yet broadband offerings continue to differ from one another, and broadband Internet use continues to evolve rapidly. At the same time, consumers are still trying to figure out what features they want and why, and how much they are willing to pay above the cost of dial-up Internet service.

This doesn't suggest the story of broadband can never approximate the morality tale that some see now. But until then, perhaps the moral of the tale is that we should resist making simple a set of market dynamics that are inherently not.

posted by Kyle Dixon @ 7:04 PM | Broadband