The Impact of Video Service Regulation on the Construction of Broadband Networks to Low-Income Households

This Policy Paper demonstrates that policies that hinder a new entrant's ability to sell video programming, such as forcing entrants to obtain a local cable franchise agreement, will strongly diminish that entrant's incentive to deploy fiber to low-income households. Using publicly-available data from the U.S. Census Bureau, we employ a simple graphical analysis and a simulation of network deployment to show that a new entrant will pass substantially more households - and in particular low-income households - if that entrant can readily offer video with voice and broadband Internet access services than it will if its ability to sell video services is sharply curtailed or delayed. In our simulation, video service takes on the role of a silver bullet - i.e., when the network firm can bundle video, the percentage of poverty and minority homes with access to the network rises significantly. Accordingly, our analysis indicates that policies that make video competition more difficult will lead to significantly lower deployment of advanced broadband networks in low-income areas than would occur with pro-entry video policies.