Greensboro Is Talking

The following is from the preface of the final report submitted by the Berkman Center for Internet & Society at Harvard University on February 16, 2010 to the FCC in response to the National Broadband Plan.

“The basic large economies of scale of communications networks have not been repealed by the transition
to digital communications networks. The failure of twentieth-century natural monopoly regulation
pushed advanced economies everywhere to experiment with different models of achieving competition.
The two primary methods have been an effort to leverage cable and telephone convergence: fostering
competition between these two platforms in the broadband market; and using new regulatory techniques
to enable competition over shared or partially shared infrastructure. These have been complemented in a
few places by public investment in the public-utility-like facilities.

The transition to next generation connectivity is heightening the effect of the large economies of scale.
In particular, the fiber-to-the-home networks that are likely to dominate future home connectivity
involve very high costs of low-tech, labor-intensive elements like digging trenches, placing ducts, and
pulling fibers through the walls of subscribers’ homes. In the short term, the costs of fiber-to-the-home
deployment are several times higher than the cost of cable upgrades to next generation speeds, which
require mostly electronic upgrades. In the long term, fiber-to-the-home networks have vastly higher
capacity and upgradeability. These facts to some extent undermine the business and technological
convergence effects that played so central a role in the first-generation transition by weakening the
efficacy of media convergence for sustaining a competitive market in digital media and communications
carriage networks.

During the first broadband transition, a major assumption underlying the reliance on facilities-based
competition was that cable and telephone infrastructures already in place needed relatively low and
largely symmetric cost upgrades to provide Internet services. This meant that, at a minimum, there
would be two facilities whose incremental upgrade costs were sufficiently low to be able to compete
head-to-head in retail broadband markets. In addition, there were some hopes that the same would be
true of power lines and wireless systems. Together these meant that technological convergence could
underwrite competitive markets among players, each of whom invested in—and owned—their own complete
facilities.”

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