The mitigating role of regulation on the concentric patterns of broadband diffusion. The case of Finland

Abstract

This article analyzes the role of Finnish regulation in achieving the broadband penetration goals defined by the National Regulatory Authority. It is well known that in the absence of regulatory mitigation the population density has a positive effect on broadband diffusion. Hence, we measure the effect of the population density on the determinants of broadband diffusion throughout the postal codes of Finland via Geographically Weighted Regression. We suggest that the main determinants of broadband diffusion and the population density follow a spatial pattern that is either concentric with a weak/medium/strong strength or non-concentric convex/concave. Based on 10 patterns, we argue that the Finnish spectrum policy encouraged Mobile Network Operators to satisfy ambitious Universal Service Obligations without the need for a Universal Service Fund. Spectrum auctions facilitated infrastructure-based competition via equitable spectrum allocation and coverage obligation delivery via low-fee licenses. However, state subsidies for fiber deployment did not attract investment from nationwide operators due to mobile preference. These subsidies encouraged demand-driven investment, leading to the emergence of fiber consumer cooperatives. To explain this emergence, we show that when population density decreases, the level of mobile service quality decreases and community commitment increases. Hence, we recommend regulators implementing market-driven strategies for 5G to stimulate local investment. For example, by allocating the 3.5 GHz and higher bands partly through local light licensing.