The Impacts of State Broadband Rate Regulation
Competition in the US market is healthy and growing, driving prices down and expanding options for consumers.
New York state has adopted rate regulation on fixed broadband, and several other states are considering similar policies. If introduced, rate regulation is expected to impact investment decisions – and therefore competition – in the broadband market.
This study explores:
- The state of the broadband market today
- The nature of rate regulation and where it is used
- The impact of rate regulation on broadband
The impact of rate regulation on fixed broadband is modeled by:
- Constructing a business case for an ISP network expansion
- Estimating build costs for locations with existing fixed wireline providers across the US at the census tract level
- Modeling which census tracts would have viable business cases under normal revenue assumptions (i.e., base case)
- Comparing the base case results against the outputs of the model under a range of broadband rate regulation scenarios
- Assessing the aggregate impact on investment and competition
This study finds that rate regulation would have cascading impacts across the industry:
- Less Investment: Fewer areas would be economically viable for providers to invest in new projects, expansions, and services.
- Less Competition: Worse business cases for investment would result in fewer areas gaining additional competition. In the absence of new entrants and with lower returns, incumbents may also be less incentivized to make network upgrades.
- Slow Down in Pricing Decline: With less competition in the market, the historical trend towards lower prices may slow down.
- Higher Costs: Consumers may also face higher prices on non-broadband services as providers adjust prices on non-regulated services to cover their costs.
- Fewer Services: Fewer network expansions mean less availability of other services that stem from provider networks as well, including video, voice, and business services.
