Government Intervention: Why is Competition not Sufficient for Broadband Deployment?

Paper in proceeding, 2009

The contributions of broadband to economic and social development have been accepted both empirically and theoretically. Many policies and regulations have been introduced to stimulate broadband penetration and growth. Yet competition is among the most fashionable policies of countries and regions. According to theory, perfect competition is the most efficient means of resource allocation, price reduction, innovation and product improvement. However, perfect competition cannot be observed in the real world, especially in the telecommunications market. The adoption of market-driven policy does not automatically bring such benefits to all regions of a country, partly because the existing levels of infrastructure and services are significantly lower in some areas. In many countries, in particular developed countries, many government policies on stimulating broadband deployment have been initiated, such as the American Recovery and Reinvestment Act of the USA and the European Economic Recovery Plan. Against this background, this paper will provide an overview and recent developments of broadband deployment in the European Union and countries in Europe. The paper will also discuss theoretical considerations regarding government intervention together with positive and negative impacts of government intervention in broadband. A comparative study of broadband policy on the issues of broadband development schemes, and amounts of money put into the market of countries in Europe, will be provided. The paper will then analyze the role of government in European countries in broadband development, and end with discussion of whether, when and how government should intervene in the broadband market.