Facilities to service based competition, not service to facilities based, for broadband penetration: A comparative study between the United States and South Korea

• Authors: Sujin Choi
• Venue: Telecommunications Policy
• Year: 2011

As a fundamental infrastructure in the Era of Information, a broadband network has a significant impact on democracy, economy, and society, indicating the importance of policy to increase broadband penetration. Considering the characteristics of broadband as a network, many governments introduced service-based competition, which is assumed to lower entry barriers by allowing entrants to lease incumbents' facilities, as a stepping stone to facilities-based competition. Questioning this unidirectional approach, the present study examines how the direction of policy implementation, that is service- to facilities-based versus facilities- to service-based, affects broadband diffusion. Through the case study of the U.S. and South Korea which experienced both modes of competition in opposing temporal sequences, this research concludes that facilities- to service-based competition might contribute to higher and faster broadband diffusion than service- to facilities-based competition. Rather than impose unbundling obligations against incumbents, facilities-based competition with financial support of the government to entrants seems to induce an earlier peak in broadband penetration. Additionally, consistent commitment of the government enforcement appears to be critical in implementing service-based competition. Though limited to the cases of the U.S. and Korea, this study suggests that service-based competition may be neither a necessity to facilitate broadband diffusion nor a precondition to introduce facilities-based competition. Moreover, service-based competition policy can function to deter overbuild of facilities and lessen the financial burden of broadband service providers if adopted after an initial period of facilities-based competition policy, which includes government investment in broadband facilities, that seems to help promote competition and give incentives to construct networks. Contrary to the literature, the present study raises a new perspective of the role of service-based competition as an enhancer for service quality and that of facilities-based competition with government investment as a booster of early and rapid broadband diffusion.