Broadband local access networks: An economic and public policy analysis of cable modems and ADSL

This work analyzes broadband access networks for households and small businesses based on ADSL and cable modem technology from an economic and public policy perspective. A cost model for broadband networks based on ADSL and cable was developed. The model uses the basic structure of the HAI Model 5.0a, developed by HAI Consulting, Inc, including its rich data set containing detailed demographic, geographic and geological information of the areas served by each telephone company in the US. The ADSL and cable architectures are compared in two different configurations. The first configuration is a hybrid architecture offering a bundle of voice and broadband Internet access, where voice is offered using traditional circuit switching technology. The second configuration is an integrated architecture where both voice and Internet access are offered over a single IP platform.; Results show that broadband networks based on cable have lower capital costs than comparable networks based on ADSL. Cable is a more cost effective solution both for the hybrid and integrated architectures and its advantage extends across all density zones. In general there is a much greater degree of equipment and plant sharing in the cable architecture as compared to the ADSL architecture. The other main conclusion is that integrated IP architectures have lower capital costs than hybrid architectures. This result was observed both for ADSL-based and cable-based access networks.; The main public policy implication of this work is in the area of competition in broadband access networks. For ADSL, it was shown that co-location of DSLAMs at central offices and the use UNEs can be the basis for competitive choice to consumers in broadband access. However, for ADSL networks with remotes in the loop and for cable networks an analysis of unbundling opportunities showed that the only viable alternative for competitive service providers or ISPs is to lease the entire access link from the incumbent on a wholesale basis. Since competition is not easily created at the infrastructure level, a truly open-access infrastructure is required in order to promote a competitive environment at least in terms of the services offered over it.