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Let customers benchmark broadband
The US Federal Communications Commission (FCC) recently asked how it should define “advanced telecommunications capability;” that is, broadband. This is a curious question because it presumes that the FCC should define broadband. Don’t customers define broadband every day? Why not simply watch what they do?
Why is the FCC asking how to define broadband?
The FCC is asking the question because Section 706 of the Telecommunications Act of 1996 requires the agency to report to Congress whether broadband “is being deployed to all Americans in a reasonable and timely fashion.” It is sensible for the FCC to ask how it should understand this requirement, especially the meaning of the term “advanced telecommunications capability,” so the FCC issued a Notice of Inquiry (NOI) asking for input.
But most of the people who will respond to the NOI will be pundits, special interests, and companies with skin in the game. Their self-interests will influence their input. Maybe the FCC is asking the wrong people.
Who knows what broadband is?
Customers. Even Congress knows that customers are the experts — the Telecommunications Act of 1996 says that the purpose of the act is to “promote competition and reduce regulation in order to secure lower prices and higher quality services for American telecommunications consumers and encourage the rapid deployment of new telecommunications technologies.” More competition and less regulation strengthen customers’ voices and weaken the influence of the usual commenters and lobbyists.
How can the FCC engage customers to fulfill its mandate?
By watching what customers do. Every day, customers balance what they want in advanced telecommunications against what it costs. Customers differ in what they value. Those who are always on the move value mobility more than other customers do. Gamers want a different kind of broadband than casual web browsers do, and home businesses want something different yet. And 5G will be a game changer by enabling the internet of everything.
The best way to watch customers is to gather data on what they are buying and carefully correlate it with geography (which tells us about costs), demographics, local business economies, and the like. The result would be a series of profiles showing the types of services customers of particular types purchase at various prices and with certain probabilities. For example, an output might be that a particular demographic of customers with home businesses in urban settings in the Midwest purchase 50 megabits per second (Mbps) fixed for $40 per month 25 percent of the time, 75 Mbps for $80 per month 50 percent of the time, etc. Research from the Technology Policy Institute would be a good start.
What would the results tell the FCC and Congress?
These results would be useful for at least three purposes. One purpose would be to identify problems. If a location or demographic is inexplicably different and purchases less than would be expected, the agency and Congress could investigate to see if there are obstacles, such as barriers to competition. Another purpose would be to identify changing patterns to see in advance where regulations and policies are becoming outdated or otherwise standing in the way of progress.
The third purpose would be to identify what the agency should include in its universal service policies. If a geographic area does not have broadband, the FCC could use the results of its customer study to determine what customers in the area would likely find valuable. Then, the FCC could do a cost-benefit study and an economic feasibility study — and conduct a reverse auction if a subsidy is potentially needed — to determine what, if any, financial incentive might be appropriate for the area.
Two hundred and forty-one years ago, Adam Smith explained to the world the value of letting customers express their opinions through their purchases. Perhaps a good review of The Wealth of Nations would be valuable in the FCC’s NOI.