High speed Internet expansion hampered by old industrial models

Old 20th century industrial models are holding back the expansion of high speed Internet access across North America, according to a Harvard law professor.

Delivering the keynote address at the University of Ottawa launch conference for Centre for Law, Technology and Society, Yochai Benkler detailed the challenges related to expanding next generation broadband (30MBps and higher) networks across North America.

One major issue Benkler pointed out is that “20th century industrial models retain intellectual and political sway on debates.”

The prevailing wisdom in North America would seem to be that competition between telephone companies offering DSL and cable providers offering cable Internet access should be enough competition to drive the market.

However, Benkler noted that European and Asian countries that have gone against this wisdom have faster and cheaper Internet with higher penetration rates.

The biggest obstacle to more competition in the cost of entering the market. Setting up the infrastructure to provide faster Internet speeds to consumers and businesses is prohibitively expensive.

A solution which has been somewhat implement is unbundling: allowing smaller companies to use the existing infrastructure running from the central office to customer’s home to deliver the smaller company’s services.

Though, this solution comes with it’s own issues, namely investment deterrence.

Why would a large telecom company want to invest money improving their infastructure when it means smaller firms can just piggy-back on their improvements with little upfront investment on their part?

It’s an issue Benkler said is “completely understandable.”

But looking to countries in Europe, we find solutions that don’t have the same issue of imbalance.

In countries like Switzerland, there has been cooperative investment, where Internet service providers have pooled the corporate coffers to build the infrastructure jointly, then compete with that in place.

Alternatively, there’s what Benkler described as the “Real-Estate Model” where one company builds the high-speed network as a dumb pipe and sells access to ISPs.

Finally, there are Public Private Partnerships in which the government and private sector share the cost of building a network.

As it stands, the old ways of the telecom industry do not seem to be helping expansion.

“Sharing costs seems to be necessary to improve competition,” said Benkler.