Following on from the previous post, “Public or Private“, which looked at the different models of public intervention in markets generally, this post begins to explore the different models for intervention in broadband markets. This is not a practical critique of any particular approach – more a quick look at the theory of the principles of intervening in broadband and digital isolation.

The basis of this is the same scale of intervention used in the previous post, ranging from light touch loan guarantees through to a state utility model. It begins with the assumption that the market will  invest up to a natural limit; this limit may vary from company to company but will be based on some measure of digital isolation.

A key complexity for public bodies is how to determine the market’s limit for investment. Broadband markets, as distinct from traditional telecommunications markets, increasingly contain a broader range of companies and capabilities; some of these are emergent trends while some are established niche operators. This trend creates a complexity and often a degree of risk that administrations considering a broadband intervention need to assess.

Its clear from even a cursory review of international interventions that there is no universal view of this, with some administrations favouring a more traditional telecommunications play, leveraging a small number of larger, established operators, where other administrations are looking to include a wider spectrum of alternative, new and niche operators. Ultimately this will depend on national culture, the appetite for risk within the administration, and the level of stability within the niche and emerging sectors.

Its also important to note that digital isolation will include a wider basket of characteristics than simply rurality or population sparsity. While these are clearly aspects of anyone’s measure of digital isolation  there is a need to include aspects such as digital exclusion for social reasons which may be linked to urban areas as much as rural; if these traits lead to low levels of take-up then they represent a barrier to market-led investment.

intervening in broadband and digital isolation

Intervention and Digital Isolation

The chart above plots the different types of intervention against some measure of digital isolation. It assumes that an intervention at lower levels of digital isolation is rarely warranted purely on the basis of digital isolation – that’s not to say an administration couldn’t make a case based on other strategic criteria, and there are several economies around the world that have done just that.

However, limiting the criteria to just digital isolation and applying the thinking in the Public or Private article produces a zone where public interventions are likely to strike a balance. If the medicine is too strong at lower levels of digital isolation then the intervention risks distorting the market too much (A on the chart), while there is a risk that a light touch approach in more isolated geographies risks being ineffective.

This balanced “green zone” is generally the sweet spot for interventions in many market economies, increasing the strength of intervention at higher levels of digital isolation. This approach implies that in order to optimise the intervention and to balance the efficacy with the market distorting effects a number of different types of intervention may be necessary, but this will necessarily be something driven by local circumstances – there may be for example, insufficient variety and capacity to develop multiple paths to ubiquitous broadband infrastructure.

Each market will therefore have a unique balance between the green, amber and red zones. So while this model can’t prescribe a solution without local modelling, it does help to frame the shape of interventions – overlaying  local market capacity, investment opportunities and so forth with this model will start to shape the options for intervention.

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