October 9, 2013
Speaking of the government shutdown, just before doors were locked and websites turned off, we released a new report on competition in the telecommunications industry. To access the report itself, hit the feature spot above. Below is the summary post from last week. — IIA
Earlier today, IIA released a new report authored by Dr. Anna-Maria Kovacs titled “Telecommunications Competition: The Infrastructure-Investment Race.” In the report, Dr. Kovacs finds that outdated regulations that force companies to build and maintain obsolete copper-based legacy telephone networks are unnecessarily diverting investment away from modern broadband networks and services that 95% of U.S. households prefer, desire and use.
The report also finds that the overwhelming majority of U.S. consumers have a plethora of choices to meet their voice, video, and Internet-access communications needs. They rely on the use of smart wireless devices, cellphones, wired Internet-enabled VoIP services, and over-the-top Internet-enabled applications (i.e. Skype), far more than on traditional telephony to stay connected in today’s digital age. These choices are available over different platforms—wireline, cable, wireless, and satellite—that compete on the basis of different economics and different technical characteristics. Those differences enable these platforms to innovate to satisfy a variety of consumer needs, to serve different customer segments, and to make their competition sustainable.
Dr. Kovacs also notes that 99% of all U.S. communications traffic is now carried over these platforms in Internet Protocol, while legacy circuit-switched traffic is now less than 1% of traffic and likely to further decrease to a small fraction of 1% by 2017. Additionally, at year-end 2012, 38% of Americans relied on wireless exclusively, 4% relied on VoIP exclusively and only 5% relied on traditional plain-old-telephony (POTS) exclusively. Another 53% relied on wireless in combination with either POTS (29%) or VoIP (24%).
To illustrate how the current regulatory framework is slowing investment in broadband infrastructure, Dr. Kovacs looks at the incumbent telephone companies’ capital expenditures during the 2006 through 2011 period. She estimates that the incumbents spent a total of $154 billion on their communications networks. More than half of that was spent on maintaining fading legacy networks, leaving less than half to upgrade and expand their high-speed broadband networks. In contrast, cable providers, who are free from legacy network rules, spent a total of $81 billion in capital expenditures over the same six-year period, and were free to dedicate all of it to their broadband infrastructure.
Those are just some of the highlights. Read the full report to get the entire picture of how outdated regulations are unnecessarily diverting investment from broadband. To get a snapshot, check out the video below, which features a number of slides Dr. Kovacs put together to illustrate the report.