Singleton on Build Out Requirements

by on April 6, 2006

Solveig Singleton has a great post over at the PFF blog setting the record straight on build-out requirements. She really should have posted the post here herself, but since she didn’t, I’ll do it for her:

This whole debate is saddening, and a little surreal. Here are some basic realities about build-out:

Whether or not an area can be profitably built out has to do mainly with population density. Low-income areas tend to be high-density (at least in urban centers) and therefore historically the tendency has been that these areas are built out well before more sparsely populated suburban areas. Furthermore, lower-income areas have had a pretty healthy demand for tech services. The odd thing is that legislators such as Rep. Markey, who have been around the tech legislation scene for years, really should know this.

The second fact is that build-out requirements have a rather sad history themselves: As economist Tom Hazlett has thoroughly documented, these requirements were rarely imposed on the first entrant into the cable market. Generally it was rare for such entrants to build out into the entire market immediately, it usually took a few years. The idea that first entrants have labored under such requirements is a myth, a myth fostered largely to present formidable obstances to the entrance of a second competitor in the market.

The more I learn about the issue, the more amazed I become at how weak the arguments of franchise reform opponents are.

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