September 28, 2006

80-20 Rules in Telecom [1:39 pm]

Joseph Turow refers to the 80-20 rule in retail (20% of the customers account for 80% of the revenue); here’s an example that points out why the market is not always the best instrument for allocating resources, particularly when those resources are a little more important than the latest DVD releases: Rural Areas Left in Slow Lane of High-Speed Data Highway

For most businesses, the goal is to attract as many customers as possible. But in the fast-changing telephone industry, companies are increasingly trying to get rid of many of theirs.

[...] Verizon is not alone in its desire to reduce the number of landlines it owns. Big phone and cable companies are reluctant to upgrade and expand their networks in sparsely populated places where there are not enough customers to justify the investment. Instead, they are funneling billions of dollars into projects in cities and suburbs where the prospects for a decent return are higher.

But those projects are unlikely to reach rural areas of Vermont and other states, leaving millions of people in the Internet’s slow lane, just as high-speed access is becoming more of a necessity than a luxury. The United States already lags behind much of the industrialized world in broadband access.

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