The Economic Benefits of Ubiquitous Broadband with Public Networks

 
The Economic Benefits of Ubiquitous Broadband with Public Networks
A wave of opportunity for wireless broadband applications is in the making. Most of it lies in the form of
broadband deployment. In their April 2001 white paper "The $500 Billion Opportunity: The Potential
Economic Benefit of Widespread Diffusion of Broadband Internet Access," Robert Crandall and Charles
Jackson point to an economic benefit of $500 billion per year for the American economy if broadband
Internet access were to become as ubiquitous as landline phones.
The remainder of this chapter assumes that it is considerably cheaper (both in terms of hardware and
lawyers) to deploy wireless broadband Internet to a residence than a similar service that depends on
wiring (copper wire from the phone company or coax cable from the cable TV company). Both telephone
wires and cable TV coax cable are accessible by almost 90 percent of American households. Even if they
were not, the cost of copper wire, for example, is 15 cents per foot. The physical cost of connecting a
home to the Internet in most residential applications is not that high. However, for a new market entrant,
gaining the right-of-way from private landowners and public utilities to get to those households in most
cases will not be possible without costly legal procedures. The legal costs of running wire or cable to a
residence may not be offset by the revenue generated from subscription fees from that residence.
Using 802.11 as a means of access does not require legal dealings for rights-of-way and, compared to
wired infrastructure, can be deployed much more quickly. Based on the fact that only 8 percent of U.S.
households have broadband access via either telephone wires or cable TV coax cable, it will be assumed
that these wired means of access are, for a variety of reasons, inadequate for achieving the same level of
penetration in the market as telephone service. As evidenced by the efforts of CLECs to offer competitive
residential telephone service using incumbent telephone poles and other incumbent-owned and -
operated facilities, it is far easier to bypass PSTN facilities than to utilize them via legal means. 802.11
only requires an AP to be accessible by a residence. A wireless service provider only needs to install an
AP and turn up the service. The remainder of this chapter explores the benefits of ubiquitous residential
broadband Internet access, assuming the ease and economy of Wi-Fi is a catalyst for achieving the same
levels of penetration for broadband Internet access as residential telephone service has today.
As the uses of broadband multiply, the value to subscribers rises far above the monthly subscription
price. This is the consumer surplus from the innovation. Producers of new services that rely on the
broadband (for example, i-mode-type services, Net2Phone, and so on), of products used in conjunction
with broadband service (soft-switches, media gateways, IP phones, and residential gateways), and even
of the broadband service itself also benefit from the greater diffusion of broadband. The producer surplus
that is generated by sales is a real benefit to producers and, therefore, to the economy. Currently, no
more than 8 percent of American households subscribe to a broadband service; only slightly more than
50 percent subscribe to an Internet service of any kind; and 94 percent subscribe to ordinary telephone
service.[10] If broadband becomes ubiquitous, it would resemble current telephone service in its
household penetration.