By Bruce Mehlman
The market for “special access” data services is getting more competitive all the time. And now there is additional fresh economic evidence of this.
For those who aren’t familiar with this important telecommunications issue, “special access” refers to bulk data connections used by businesses. For some time now, large traditional telecom providers have come under fire from critics who contend they make this sector uncompetitive, and the Federal Communications Commission has been investigating the issue.
But three professors (Mark Israel, Daniel Rubinfeld and Glenn Woroch) have analyzed the FCC’s own data and found that many businesses have competitive options that are geographically close to them. AT&T’s counsel summed up the professors work like this: “… these new, more precise data show even more dramatically that the vast majority of locations with special access demand are extremely close to multiple facilities-based competitors — indeed, in most cases, within a few hundred feet.”
To understand why the market is competitive, it’s important to understand how the market actually works. The professors write: “… competitive providers deploy fiber networks in areas where there is demand for special access services, use those networks to compete for customers located in buildings in the vicinity of those fiber networks, and then deploy connections to buildings where they win customers.”
Why does this matter? Because the realistic opportunity (a bid) to capture a market from an incumbent itself is a sign of competition, since it constrains the prices the incumbent can offer. With only one provider, prices would be higher. With competitive providers sniffing around and building fiber very close to potential customers, prices are constrained.