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New FCC Policies Will Deter Broadband Deployment, Phoenix Center Warns
[September 22, 2004]

New FCC Policies Will Deter Broadband Deployment, Phoenix Center Warns

WASHINGTON, Sept. 22 /PRNewswire/ -- A new Phoenix Center study released today says that new regulatory policies allowing the incumbent Bell companies to raise the wholesale costs of loops used for Internet access are likely to slow broadband deployment and reduce the number of service providers. The study said that if loop prices had been even $1 higher over the last two years, some 3.6 million households would be unable to purchase broadband services today.

"By giving in to incumbents' demand for higher wholesale prices, new FCC policies will make it harder to achieve President Bush's goal of universal broadband access by 2007," study authors George Ford and Lawrence Spiwak conclude. "Higher wholesale prices will increase the Bell companies' market power as competitive firms are forced to exit the market."
The study shows that the now discarded policy of basing wholesale rates on forward looking costs as measured by TELRIC (Total Element Long Run Incremental Costs) had successfully boosted both the availability of broadband service and the availability of competitive broadband services by increasing the number of communities in which residents could choose from four or more providers.
The study, which also takes account of population patterns, provides state-by-state projections of the effect of higher prices on broadband availability. It estimates that for California, the number of households with access to broadband would have fallen by about 417,226 if loop prices increased by $1. In New York State, nearly 240,000 households would have been denied broadband and some 214,000 Floridians would have been denied access to high-speed Internet service if prices had been just $1 higher during the last two years.
On the other hand, every 10 percent decline in prices would have raised the number of zip codes with broadband access by one percent.
"This study adds to the mounting work showing that wholesale network access requirements (like unbundling) do not dampen broadband availability or investment incentives more generally," the study concludes. "To the contrary, the analysis contained herein strongly shows that states that have established relatively lower rates for unbundled loop access have enjoyed more deployment of broadband technology within their borders."
The full Phoenix Center Policy Paper 19, The Positive Effects of Unbundling on Broadband Deployment, can be downloaded free from the Phoenix Center web site at
The Phoenix Center is an international, non-profit 501(c)(3) organization that studies broad public-policy issues related to governance, social and economic conditions, with a particular emphasis on the law and economics of regulated industries.
Phoenix Center for Advanced Legal & Economic Public Policy Studies

CONTACT: Lawrence J. Spiwak of the Phoenix Center for Advanced Legal &Economic Public Policy Studies, +1-202-274-0235

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