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The Broadband Problem

Anatomy of a Market Failure and a Policy Dilemma

Charles H. Ferguson

Publication Year: 2004

As the Internet revolution continues to unfold and transform telecommunications, pressure is building for faster, less expensive, and more widely accessible broadband service. Such a development would facilitate improved and less expensive traditional applications such as voice telephony and web browsing. It would also enable new and useful applications such as Internet-based television, videoconferencing, and software distribution. Broadband has great potential to improve efficiency and productivity, even to improve national security in some cases. Broadband service and affordability, however, have consistently lagged well behind demand and progress in information technology, with damaging results. The Internet revolution remains incomplete and threatens to stagnate if the situation continues. In The Broadband Problem, economist and technology entrepreneur Charles H. Ferguson explains the causes and ramifications of this damaging bottleneck, and he offers suggestions on improving the current state of affairs. He asserts that current telecommunications law and policy have not provided sufficient levels of new entry, competition, and innovation in the local telecom market. The continuing dominance of ILECs (incumbent local exchange carriers) in that market impedes the healthy, and much-needed, development of an efficient broadband market. The result of these policy and market failures is inadequate technological progress, innovation, and productivity in advanced Internet services and telecommunication services generally. The broadband problem is holding us back, and thus must be addressed and solved. With this important volume, Charles Ferguson has contributed mightily to that mission.

Published by: Brookings Institution Press

Title Page

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pp. v

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pp. vii-x

Less than a decade ago, the U.S. telecommunications industry appeared to be prospering beyond all expectations, and the Internet revolution promised an unprecedented increase in the speed and ease of global communication via a universal network that used ordinary telephone lines. ...

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pp. xi-xv

Obviously it is impossible to write a book such as this without a great deal of help. First, many people expert in many domains took the time to answer questions, provide information, explain technologies and industries and laws: economists, past and present government officials, lawyers, professors, business executives, ...


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pp. xiii-xiv

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Chapter 1. Introduction

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pp. 1-30

Of all the factors blamed for the U.S. economy’s recent problems, one that has received insufficient attention is the failure of the local telecommunications industry to provide rapid technological progress and cost reductions in the high-speed data communications services necessary to an advanced information economy. ...

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Chapter 2. Telecommunications in the Internet Age: Very High Stakes

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pp. 31-56

As a technological innovation, the Internet dates to the invention of the Internet Protocol (IP) and the IP-based Arpanet in the late 1960s. But its industrial and social impact was not felt until the invention of the World Wide Web in 1989–91, the appearance of the Mosaic graphical web browser in 1993, ...

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Chapter 3. Technological Performance

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pp. 57-96

Upon examination, the incumbent local exchange carriers emerge as slow-moving and inefficient, their primary concern in markets and in politics being to preserve their monopoly positions and existing businesses, in part by resisting improved technology.While this strategy succeeded for a long time, the ILECs’ inefficiencies ...

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Chapter 4. Financial, Strategic, and Political Conduct of the ILECs

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pp. 97-137

The ILECs’ financial, strategic, and political conduct—like their technological behavior—seems focused on preserving their local services monopolies and preventing competitors from gaining access to their infrastructure. They have been very slow to modernize local loop infrastructure, ...

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Chapter 5. The ILECs' Competitors

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pp. 138-168

The ILECs’principal, and only significant, direct competitors in wireline services are the CATV industry (in residential broadband service) and IXCs such as AT&T and MCI (primarily in business voice and data services). Remaining CLECs also hold small market shares in some areas. ...

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Chapter 6. The Policy System and Alternatives in the United States: Causes and Implications

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pp. 169-192

The assessment conducted in chapters 3–5 suggests that the U.S. broadband industry is not performing very well. Moreover, there appears to be little reason to believe that the situation will markedly improve on its own. ...

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Chapter 7. Policy Recommendations

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pp. 193-216

The policy measures proposed here concentrate on creation of an open-architecture, competitive U.S. broadband industry; structural and procedural reforms in the U.S. policy, regulatory, and research systems; national security and antiterrorism issues; and broader issues such as corporate governance, ...


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pp. 217-226


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pp. 227-236

E-ISBN-13: 9780815796442
E-ISBN-10: 0815796447

Page Count: 150
Publication Year: 2004