Broadband, a pretty campaign promise

The WSJ has a piece comparing the Bush and Kerry broadband plans (subscription required). It's a little like our broadband policy package (here), noting that both candidates are promising universal broadband access, without offering a lot of tangible details.

The WSJ article focuses on the question of how to pay for this, wondering aloud if maybe one or both of the candidates isn't really thinking about subsidies. What I think it misses is the fact that both candidates' plans do nothing to address the demand side, which is the real soft spot in getting to universality.

Bush is betting on keeping taxes low and reducing regulation, while Kerry is looking to give tax credits to companies rolling out infrastructure in rural areas. Depending on your view of how the market works, both might do something to help spur investment.

But simply having infrastructure won't make people sign up. There are pretty basic economics at work here on the subscriber side. A lot of people still don't view broadband as a life-changing, absolutely necessary thing, so there's a basic demand curve at work. The cheaper it is, the more people sign up. The drop in prices from $50 to an average of $30 has been responsible for the growth spurt of the last year, not any radical changes in the way people use the services.

But $30 is still too much for a lot of people. And in areas (like Hell, Mich.) where service isn't available at all yet, it's unlikely that competitive pressures will drive prices down once a lone company does invest. What that means is that if the candidates really want to make sure that that 20 percent of the population isnÂ’t left off the broadband bandwagon, they're going to need to think hard about competition policy, subsidies (as the WSJ notes), or other ways to let local governments attract fast networks.