Scott Wallsten, who was Chief Economist of the US Broadband Plan, has just published Does Competition Between Cable and Fiber Increase Adoption? His conclusion:
the data shows [a second carrier] won’t bring down prices on the low-income end given that that’s the place we would get new adoption. … broadband adoption, all else equal, is not higher in tracts with cable and fiber providers than it is in tracts with only a cable provider or only a fiber provider.
Wallsten
Comcast demonstrated how low prices can increase demand. The obvious explanation why adoption didn’t go up is two carrier markets have pretty much the same prices as pure monopolies. US cableco charge the same prices whether or not they have to compete with fiber.
For the last 15 years, I’ve watched cablecos and telcos raise prices in lockstep, generally at 3-5% per year. Ajit Pai became FCC Chair with a promise to bring down prices but instead saw an increase of 10%-20%, depending on what you measure,.His advocates answer back that prices had also gone up under his Democratic predecessor, Tom Wheeler.
It’s careful work, a large data sample across the country. He uses three years of data, 2017-2019, and corrects for some of the different definitions and measurements.
Scott, a Stanford Ph.D. in econometrics, dived into the data. About 50 million US homes have a choice of fiber or cable, just under half. About as many have only one decent broadband provider.
I’ve learned the miracles of competition are rare until there are 4-7 companies. Scott’s data has confirmed what Wall Street has known for a decade. Two companies may look to win customers with promotions, but very rarely by lowering prices.
Here in Manhattan, I’m one of those with no choice. Verizon hasn’t brought Fios to my building; 3 Mbps is unacceptable in 2021. I only can use cable.
The word is spreading among the broadband experts in DC that the Biden and Harris $100 billion broadband infrastructure seems an attractive idea but is guaranteed not to deliver the results promised.
Scott, a well-trained academic, makes a point of noting the limits of his study. He has looked at standard broadband offerings. Most new subscribers are low-income; 90% of upper-income homes are connected. Wallsten does not have data on competition for this group.
I’m 99% sure if he had data, he would find two telecom companies avoid competing on price.
Abstract
U.S. broadband policy has emphasized the importance of facilities-based competition
given its potential to encourage investment, improve quality, and lower prices. A natural
question to ask today is whether this competition can encourage more adoption. Using
Census-tract-level data from the FCC and the American Community Survey (ACS) from
2017-2019, I find that competition between cable and fiber does not seem to bring the last
group of unconnected people online. More accurately, broadband adoption, all else equal,
is not higher in tracts with cable and fiber providers than it is in tracts with only a cable
provider or only a fiber provider.