Andrew Odlyzko has some more on the economics of broadband and the parallels with the nineteenth century railroads; The many paradoxes of broadband. From the abstract:
A careful examination shows that broadband is full of puzzles and paradoxes, which suggests caution before taking any drastic action. As one simple example, the basic meaning of broadband is almost universally misunderstood, since by the official definition, we all have broadband courtesy of the postal system. Also, broadband penetration, while generally regarded as disappointingly slow, is actually extremely fast by most standards, faster than cell phone diffusion at a comparable stage. Furthermore, many of the policies proposed for advancing broadband are likely to have perverse effects. There are many opportunities for narrowband services that are not being exploited, some of which might speed up broadband adoption.
There are interesting dynamics to the financial and technological scenes that suggest broadband access may arrive sooner than generally expected. It may also arrive through unexpected channels. On the other hand, fiber-to-the-home, widely regarded as the Holy Grail of residential broadband, might never become widespread. In any case, there is likely to be considerable turmoil in the telecom industry over the next few years. Robust growth in demand is likely to be combined with a restructuring of the industry.
More entertaining is to read this from the conclusions:
[L]et me suggest three other methods for stimulating broadband, one intriguing but totally impractical, one very practical but incremental, and one speculative.
The impractical method for stimulating broadband adoption is to make music free on the Internet. Currently, music file sharing appears to be one of the main drivers behind the spread of broadband. (It is certainly among the main generators of traffic.) Instead of using the law to choke file swapping, perhaps we should encourage the telecom industry to buy off the music studios, as was suggested in . Total recorded music sales in the U.S. come to a grand total of about US$15 billion per year, while telecom spending is over 20 times higher. Moreover, of that US$15 billion, only about half goes to the studios. Thus in the abstract, it might be a wise investment for the phone companies to buy out the studios. This is of course wildly impractical for business and legal reasons, but it would quickly stimulate demand for broadband. (It would also demonstrate that the content tail should not be wagging the telecom dog, as it too often does in political, legal, and business discussions.) A slightly more practical method would be for the government to enact a compulsory licensing scheme that would have a similar effect. However, given all the concerns about fairness and consensus, it is doubtful the government could come up with an acceptable scheme fast enough to do much good.
A more practical method for stimulating broadband is to encourage migration of voice calls to cell phones. With their bread-and-butter business declining rapidly, the ILECs would then have to utilize the competitive advantage of wired links by promoting broadband connectivity. This migration could be speeded up by forcing the ILECs to spin off their wireless subsidiaries, to prevent cross-subsidization and encourage competition. The cellular operations are operated almost as separate businesses, so there would be little of the problem of unclear boundaries that bedevil other proposals, such as that of separating the ILECs into basic connectivity and service providers. Making more spectrum available for cellular would also promote the move of voice telephony to radio channels.
Finally, the third technique for stimulating broadband is to encourage innovative new wireless technologies. This could include both conventional and Ultra Wide Band, and both licensed and unlicensed approaches. It would require making substantial additional spectrum available for wireless. The advantages of wireless include not only the potential of lower costs, but also the prospects of having multiple local carriers providing “first mile” connectivity.