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Why European Broadband is Faster and Cheaper

Engadget features a great piece on the link between government regulation and broadband. While the piece is focused on the EU vs. US, many of the same lessons apply in Canada.

2 Comments

  1. Is There More Than One Form of Local Loop Unbundling?
    On the surface, the situation in the UK appears to be that the regulator insisted on Local Loop Unbundling, and third parties made competition happen. If you do a cursory check, that would seem to be what we have here in Canada as well.

    However, digging deeper suggests something is either different, or amiss. The usual tariffs in canada make it impossible to offer any service for the lowest UK price of $6 – that won’t even cover the tariff. So – point one is that even if Local Loop unbundling happens, the regulator has to make sure the pricing to third parties enables this competition. Since Bell moved to make all tariffs of 5MB/s or under the same – at about $20 – there is no possibility of TalkTalk’s low-end plan at about $6 (which, by the way, has a 40GB monthly transfer limit!!!).

    But the other question is more technical, and I’m hoping someone knowledgeable can chime in with a response. In the UK, is Local Loop Unbundling “soft” like it is in Canada, and BT continues to make the DSL modem connection but hand off the data? Or is it “hard” – where the copper is connected to a different switch? (what I expect we would call “dry loop”) Or is it some third option, where baseband telephone is still with BT, but the high frequency communication is split out to a separate DSL modem owned by the third party?

    As most readers here know, Canada has “soft” unbundling, meaning that it often appears as though Bell’s infrastructure is a roadblock to improvements. In that case, what may be needed is a change in perspective from the regulator — that the pricing for “hard” unbundling *must* be low enough to foster a market, and incumbents will just have to deliver this unbundling at a lower price or lose money.

    Of course, it’s not at all clear that the CRTC could actually force such a regime change. In that case, a deeper question arises — is it a fundamental difference in our legal systems underpinning the regulation that makes the UK system work?

  2. Chris, I would suggest that the answer to your question is not that simple.

    1) The CRTC needs to have people with the technological background involved in the decisions that it makes, rather than simply treating it as would be done in a court, where the winner is, in effect, decided by who makes the most convincing argument. As such, the hearings are more in line with consultations rather than fact finding missions.

    2) The CRTC needs to allow for easier access to the Bell and cable company facilities, and reduce the minimum tariffs paid. There are old tariffs on the books and still being charged, for instance you still pay $2.10 per month for touch tone even though Bell won’t provide pulse on a new service. This would support new competitors entering the marketplace. The tariffs need to be set up to encourage competition.

    3) The third item is in fact fairly simple. Competition does not automatically mean that service goes up and prices go down. If the incumbents are not losing customers to the new entrants they have no incentive to follow suit. As such, for this item the customers have to be willing to migrate to the new entrants. If they aren’t willing to move, then there are no customers for the new entrants, and all that the incumbents have to do is wait for the new entrants to leave the marketplace. The free market means that competition should reduce prices and increase service, however this requires a customer base that will actively participate in the market, rewarding the behaviours that they want and punishing those they don’t. If the consumer is passive then they will encourage the incumbent.