So the EU took a step further: they are now pushing for structural separation of the infrastructure layer from the service layer. Here’s how it works. Deploying broadband infrastructure is very expensive and results in a natural monopoly. So many local governments (such as Amsterdam) have decided to partner with private companies in creating a fiber network, which is owned partly by the city. The fiber network is open to all broadband providers, including the incumbent telco, on a non-discriminatory basis. The wholesale rates are kept low to encourage new market entrants. The city itself does not act as a broadband service provider. But it participates as an owner of the infrastructure to ensure that the network remains open to all. Moreover the city is a large user of the network (an anchor tenant).

In the Pennsylvania bill, local governments would be prohibited from doing what I just described above. In many parts of the world, it is the regional or local government that pays for and owns the fiber network, but wholesales access to broadband service providers. This ensures that the incumbent telecom operator does not dominate FTTH. People can then choose from a variety of service providers who compete on price, bandwidth and quality of service.

This is what I think of when I use the words “free market”. But this requires *some* government intervention, albeit the appropriate kind.

When cities have the leeway to partner with anyone – private companies, non-profits – or even to roll out broadband service itself, it introduces a new entrant into the market for broadband and threatens the monopoly. What a surprise that in France for example, when the local government announces “plans” to deploy broadband service in an underserved area, suddenly France Telecom wakes up and begins rolling out broadband.

Don’t mistake that bill for something that truly benefits the consumer. It’s got Big Telco or Big Cable written all over it. As far as I’m concerned, Big Telco or Big Cable is akin to the old Soviet national telephone company – a monopoly.

The failure of the US government to get the telecom incumbents to open up their lines to competitors in the broadband market has resulted high prices / low bandwidth for American broadband consumers. The incumbents have lobbied Congress to prevent this from happening, under the guise of “let the free market work”. Well it has not worked – either in broadband or in the financial sector.