The Broadband Problem: Anatomy of a Market Failure and a Policy Dilemma

In this sure-to-be controversial book released April 9, 2004 but not yet available in bookstores, Charles Ferguson attacks just about every sacred shibboleth of today’s FCC policy agenda. Why is the U.S. falling behind the rest of the world in deployment of next generation broadband service? Why does the rest of the information technology sector follow Moore’s Law but the last-mile broadband network act like a mid-20th century smokestack industry? Look no further than the FCC. The FCC doesn’t have a pro-competition agenda; it has a pro-monopoly agenda. The FCC isn’t about favoring upstarts and innovation; it’s about protecting incumbents. The FCC’s laudible goal–facilities-based competition for the next-generation broadband last-mile network–is a myth because the last-mile is wracked by market failure: it’s a natural monopoly. Ferguson wants to solve the last-mile monopoly problem not by spreading the monopoly power, like a cancer, throughout the rest of the telecom and media sector–the preferred solution of the FCC–but by separating the tumor from the rest of the body through structural separation, open architectures, and a host of other pro-competitive policies. All these ideas have been presented before but never as authoritatively and comprehensively. Ferguson, an MIT Ph.D., successful Silicon Valley entrepreneur, and now Brookings Institution Senior Fellow, brings a level of credibility to these arguments that is unprecedented. The last-mile telecom incumbents and their allies will surely want to take on Ferguson. Their task will be to bring to their own arguments the quality of reasoned evidence and discussion that distinguishes Ferguson’s work.

Participants

• Charles H. Ferguson
  Senior Fellow, Economic Studies, Brookings Institution and Author,The Broadband Problem: Anatomy of a Market Failure and a Policy Dilemma
• J.H. Snider
  Research Director, New America Foundation