Wednesday, August 9, 2006 - The Progress & Freedom Foundation Blog

WSJ on the Broadband Market

For those who don't have access to today's Wall Street Journal, I'd like to quote the beginning and end of their editorial "Wi-Fi to the Max":

The backers of so-called Net neutrality have lost nearly every battle in Congress so far, although they plan to take another tilt at that windmill when lawmakers return from recess in September.

Out in the real world, however, things are not proceeding according to script, at least for those who insist that what the Internet really needs is a brand-new layer of government regulation. Yesterday, Sprint announced plans to spend as much as $3 billion building a nationwide WiMax network that would provide high-speed Internet access to 100 million consumers by 2008, according to Sprint's estimate.

What does this have to do with Net neutrality? Well, WiMax is one of several emerging technologies that stand to reshape the Internet-service industry in the coming years. Those who argue that the government should enforce some politician's idea of "neutrality" on Internet service claim that the phone and cable companies enjoy a comfy duopoly on providing Internet access to consumers. According to this reasoning, these companies need to be regulated so they don't abuse their market position by trying to erect "tolls" on the information superhighway.

High-speed wireless Internet access, however, means no more duopoly. And WiMax is not the only contender.

That's correct. Clearwire wants to do something similar nationwide, and I'd watch for both of these companies and many others to be placing bids in the upcoming FCC spectrum auction. And let's not forget broadband-over-powerline, which is seeing its cost-allocation and interference issues addressed. Now for the editorial's conclusion:

A decade ago, the conventional wisdom was that the old-fashioned copper-wire phone network was an "essential facility." That is, it was unique, valuable and couldn't be replicated, so competition with the Baby Bells was impossible unless the "last mile" to homes was opened up to competitors to use. Today we have cable companies offering phone service and more and more cell-phone subscribers every day.

A similar thing is happening in the high-speed Internet space. Those who want to regulate broadband providers are saying that the phone and cable networks are too valuable and too hard to replicate for anyone to break up the duopoly. We guess Sprint didn't get the memo. If Congress should for some reason lose its cool and give in to the crowd pushing for greater Internet regulation, it will likely come just in time for its backers, once again, to be proven wrong about the absence of competition in telecom.

I hope our distinguished senators listen to this voice of reason rather than these odd folks.

posted by Patrick Ross @ 2:17 PM | Broadband , Communications , Net Neutrality , Spectrum , Wireless