29 August 2007

US Broadband

There are no shortage of articles like this one in the Washington Post. The theme of these articles compares the state of broadband in the US to Japan and South Korea, where access speeds and prices are better. Quoting the article:
Broadband service here is eight to 30 times as fast as in the United States -- and considerably cheaper. Japan has the world's fastest Internet connections, delivering more data at a lower cost than anywhere else, recent studies show.

Accelerating broadband speed in this country -- as well as in South Korea and much of Europe -- is pushing open doors to Internet innovation that are likely to remain closed for years to come in much of the United States.

The reason for this is given to be (again, quoting the article):
Japan has surged ahead of the United States on the wings of better wire and more aggressive government regulation, industry analysts say.

The copper wire used to hook up Japanese homes is newer and runs in shorter loops to telephone exchanges than in the United States. This is partly a matter of geography and demographics: Japan is relatively small, highly urbanized and densely populated. But better wire is also a legacy of American bombs, which razed much of urban Japan during World War II and led to a wholesale rewiring of the country.

In 2000, the Japanese government seized its advantage in wire. In sharp contrast to the Bush administration over the same time period, regulators here compelled big phone companies to open up wires to upstart Internet providers.

In short order, broadband exploded. At first, it used the same DSL technology that exists in the United States. But because of the better, shorter wire in Japan, DSL service here is much faster. Ten to 20 times as fast, according to Pepper, one of the world's leading experts on broadband infrastructure.

Indeed, DSL in Japan is often five to 10 times as fast as what is widely offered by U.S. cable providers, generally viewed as the fastest American carriers. (Cable has not been much of a player in Japan.)

Perhaps more important, competition in Japan gave a kick in the pants to Nippon Telegraph and Telephone Corp. (NTT), once a government-controlled enterprise and still Japan's largest phone company. With the help of government subsidies and tax breaks, NTT launched a nationwide build-out of fiber-optic lines to homes, making the lower-capacity copper wires obsolete.

This article (as do others of its kind) raise a number of questions that are interesting to consider:

  • Can you really compare developments in Japan and South Korea to the US?

  • The article mentions that the developments in Japan and South Korea are the result of government subsidies. Is this efficient?

  • The article discusses local loop unbundling as one of the supporting policies. These policies have been in place in the US since the mid-1990s, although recent decisions have exempted newer infrastructure builds from this policy. Telephone companies have argued that the rates that were set were non-compensatory ... that is, amounted to a subsidy of their competitors because they were below cost. It turns out to be difficult to determine the truth of this. There were many competitors in the US in the late 1990s ... many of these collapsed during the dot-com bust ... was that due to poor business decisions or changes in the rates charged by telephone companies?

  • Does the US need a different broadband policy? What should it be? There are many opinions on this (see, for example DACA on the one hand and this on the other, though there are many other proposals as well)


Paul said...

The U.S. does indeed need a new policy for broadband. A national telecommunications policy is critical to close the gaps in our broadband infrastructure. The Universal Service Fund for instance currently doesn't support broadband. This needs to change. Subsidies shouldn't be the only means of funding the deployment, but using the USF to reach rural areas would be an efficient use of this tax money. The Communications Workers of America has information on this and other initiatives at www.speedmatters.org

Martin Weiss said...

You are right that the USF doesn't support broadband ... and it remains an open question whether it should. Recent reports have been highly critical about how the USF has been spent, after all. Some years ago, Eli Noam had suggested giving money to end users in the form of vouchers instead of subsidizing carriers directly. While this has some implementation issues, it seems to me to foster flexible and efficient use of technologies.

Paul said...

It's true the USF needs reform. The CWA's Speed Matter project lists a five point plan for reforming the USF. One being requiring telecoms to submit a broadband upgrade plan before and after receiving funding. Carriers that do not meet deadlines would be subject to fines and reimbursement of USF monies.

Martin Weiss said...

What about getting rid of USF entirely? There are other approaches that have been used elsewhere in the world. Is it most beneficial to support the existing industry and its structure? How could we provide incentives for deploying high speed infrastructure without assuming the existing industry structure?

Paul said...

One incentive that is not entirely a popular one is allowing infrastructure providers to reserve proprietary bandwith to finance a buld out. The important point being the build out is such that users are not restricted or affected by the bandwith being set aside for high speed video. A large enough build out would eliminate any bandwith scarcity. Having states develop policies to promote broadband development via tax incentives is encouraging also. It doesn't all have to be on a national level to be succesful.