Competition in Broadband Provision and the Digital Divide

Competition in Broadband Provision and the Digital Divide

Wei-Min Hu (Peking University, China) and James E. Prieger (Pepperdine University, USA)
DOI: 10.4018/978-1-59904-851-2.ch016
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Abstract

This chapter examines the supply of DSL broadband by the incumbent local exchange company (LEC) in five U.S. states in the earlier years of deployment. Our empirical analysis shows that income, other demographics, and cost factors are important determinants of entry and availability. After controlling for other factors, the racial characteristics of the area do not affect DSL provision. Active competition in broadband from competitive LECs reduces deployment of DSL by the incumbent, but potential competition from competitive LECs has the opposite effect. Competition from cable companies also negatively influences the incumbent’s decision to supply DSL. Our objective in gauging the importance of the various factors is to highlight the important drivers of broadband provision for policymakers.

Key Terms in this Chapter

Digital Divide: The gap in computer and Internet usage between richer and poorer households, majority and minority groups, and households in urban and rural areas.

Wire Center: The location where a central office switch connects to the loop facilities that cover part or all of a local exchange. It is also the physical location where the loop distribution plant in the local telecommunications system can be accessed, and where the equipment enabling DSL service for subscribers is deployed. Used synonymously with “central office” in this chapter, although elsewhere sometimes the wire center refers to the physical building, and the central office refers to the switches within the wire center.

Central Office: See Wire Center.

Competitive Local Exchange Carrier (CLEC): A public telephone company that provides local telecommunications service in competition with the incumbent local exchange company.

Local Exchange Company (LEC): A public telephone company in the U.S. that provides local telecommunications service.

Telephony: A system of telecommunications employing telephonic equipment to transmit sound between points. In common parlance, the “telephone system.”

Redlining: The practice of deliberately avoiding selling products or services (in context here, broadband Internet service) in particular neighborhoods. The term comes from the credit industry, and originally meant the refusal of a bank or other lender to extend credit to customers located in a high-risk geographical area, usually a declining inner-city neighborhood. These institutions supposedly drew red lines on maps marking off the high-risk areas.

Last mile: The part of the local telecommunications network that connects the central office to the subscriber premises. The last mile typically consists of copper telephone wire.

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