A case study in the deployment of digital access technologies : DSL vs. cable modems

Abstract

From its start in the early 1900's, the communications business has been a regulated industry with little or no competition. The economic incentives to deploy new technological innovations were often overshadowed by the regulatory environment and a lack of competitive pressures. The 1982 divestiture of AT&T successfully created competition in the long distance market, however the local access market continued to operate as regulated monopoly. As the primary access point between users and the telecommunications network, the local access providers have extracted significant value from the telecommunications market. The Telecommunications Act of 1996 (T A96) was designed to open up the local access market to competition. The incumbent suppliers were required to enable competition by making their assets available to competitors. At the same time, Internet data transport was becoming the dominant telecommunications revenue source and new technologies that offered high-speed Internet access were becoming available. This thesis demonstrates that the three types of competitors defined by TA96 have evolved different strategies for maximizing the value that they can capture from the telecommunications market. By applying a case study for Cable Modems and Digital Subscriber Line (DSL) modems, it is shown that the economic incentives to deploy new technologies are not necessarily aligned with the needs of the telecommunications consumer.