Tag: "academic"

Posted December 7, 2011 by christopher

Most of us are familiar either with Metcalfe's law or the general principle of it: networks are more valuable the more people are on it. The common example used to illustrate is a telephone. One person on a telephone network is useless. Two people is an improvement. With millions, you are far more likely to be able to call the person you want to.

Metcalfe network effect

Recognizing this principle flips common arguments about connecting rural areas on their head. Ensuring that people in rural areas are connected benefits everyone -- it is not charity. Connecting people in rural areas increases the value of the connections in urban areas, creating more value for everyone.

But the flip side may be too rarely considered. As these networks have grown in size (and therefore value), the cost of those who are excluded from them also increases significantly. This means that while the costs of not connecting rural areas are high today, those costs will be even greater in coming years. The argument is rather intuitive, but for those who want to learn more, Rahul Tongia and Ernest J Wilson III published an academic paper this year in the International Journal of Communications.

The abstract for "The Flip Side of Metcalfe's Law: Multiple and Growing Costs of Network Exclusion" is here:

The study of networks has grown recently, but most existing models fail to capture the costs or loss of value of exclusion from the network. Intuitively, as a network grows in size and value, those outside the network face growing disparities. We present a new framework for modeling network exclusion, showing that costs of exclusion can be absolute, and might, at the extreme, eventually grow exponentially, regardless of underlying network structure. We find that costs of exclusion can also be spread to the “included” through several mechanisms such as parallel networks, and we also highlight how future research needs to capture the interaction of alternate or parallel networks to the network at hand. Backed by empirical evidence, this will have wide-reaching policy and design implications, particularly for the role of subsidies or direct intervention for...

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Posted May 18, 2009 by christopher

We consider how government-owned enterprises affect privately owned rivals. Specifically, we compare the types of markets that municipally owned telecommunications providers in the United States serve to the types of markets that competitive local exchange carriers (CLECs) serve. We find that CLECs focus on potential profitability while municipalities appear to respond to other factors, such as political considerations or the desire to provide competition to incumbents. As a result, municipal providers tend to serve markets that CLECs do not. We also find that the presence of a municipal provider in a market does not affect the probability that a CLEC also serves that market. Our results suggest municipalities may not pose a significant competitive threat to CLECs and do not preclude CLEC participation.

Posted May 18, 2009 by christopher

In this paper, we explore whether broadband investment by municipalities has an effect on economic growth. To do so, we employ an econometric model to compare economic growth in Lake County, Florida, with other similar Florida counties. In 2001, Lake County – a small county in central Florida – began generally offering private businesses and municipal institutions access to one of Florida’s most extensive, municipally-owned broadband networks, with fiber optic connections to hospitals, doctor offices, private businesses, and 44 schools.1 Our econometric model shows that Lake County has experienced approximately 100% greater growth in economic activity – a doubling – relative to comparable Florida counties since making its municipal broadband network generally available to businesses and municipal institutions in the county. Our findings are consistent with other analyses that postulate that broadband infrastructure can be a significant contributor to economic growth. Our results suggest that efforts to restrict municipal broadband investment could deny communities an important tool in promoting economic development.

Posted May 18, 2009 by christopher

There are 2,007 municipalities across the United States that provide electricity service to their constituents. Of these, over 600 provide some sort of communications services to the community. An important policy question is whether or not public investment in communications crowds out private investment, or whether such investment encourages additional entry by creating wholesale markets and economic growth. We test these two hypotheses – the crowding out and stimulation hypothesis – using a recent dataset for the state of Florida. We find strong evidence favoring the stimulation hypothesis, since public investment in communications network increases competitive communications firm entry by a sizeable amount.

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