Broadband Policy Lessons for 2010

A new book, The Healing of America, by veteran Washington Post reporter T.R. Reid, tells the important story of how people in many other countries get better healthcare for far less money than people in the U.S. Sadly, no one was able to force members of Congress read the book before they were allowed to vote on healthcare reform, so people in America will probably continue to pay more and get less.

The situation is exactly the same in broadband.  A recent report explains how several other countries have managed to roll out better, faster, and cheaper broadband networks than the country that invented the Internet. The report, “Next Generation Connectivity,” was prepared at the request of the FCC by a Yale Law School professor, Yochai Benkler, and the Berkman Center for the Internet & Society at Harvard University.

The report explains—in detail—exactly what policy decisions and strategies moved several other countries ahead of the U.S. in the speed, cost and accessibility of broadband networks since the late 1990s, when the U.S. was among the top three or four countries in all these measures.

In the mid-1990s, the U.S. had its own plan for promoting the rollout of faster, cheaper broadband. In the 1996 Telecom Act, Congress laid out the principles and policy options that were intended to promote competition in the communications and broadband markets, which the Next Generation Connectivity report calls “open access policies.” According to Professor Benkler, “open access policies require telecommunications providers, mostly incumbents, to make available to their competitors, usually at regulated rates, various parts of their network or service, so that the competitors can begin to compete using these components as part of their service, without having to replicate the full investment that the incumbent originally made.”

Open access policies include:

  • Unbundling:  gives competing broadband companies the right to use local copper loops.
  • Bitstream access: gives competitors the right to use existing DSL lines.
  • Collocation: gives competitors the right to install equipment in phone company facilities.
  • Wholesaling or functional separation: requires incumbents to offer services at wholesale prices to competitors, or establish separate companies selling unbundled components.

In the dispassionate language you’d expect from a law school professor, the Next Generation Connectivity report explains exactly what happened after the bill became law:

From the start however, implementation of unbundling was burdened and thwarted, largely by incumbents who resisted implementation through footdragging and litigation, but also by a judiciary that was highly skeptical of the theory behind unbundling, receptive to the arguments of the incumbents, and who exhibited little deference to the judgment of the FCC.

The report provides stark evidence in chart after chart that open access policies are indeed effective. These policies have worked in other countries. The report provides detailed case studies of broadband policies and deployment experiences for several countries, including the U.S., Japan, South Korea, and describes successful municipal broadband networks in Sweden, Switzerland, and the Netherlands.

The major obstacle to open access and broadband policies aimed at serving the public interest is the widespread belief that unregulated free markets always work better than any alternative in any situation.  But, like an iceberg melting in warmer Arctic waters, that belief is showing signs of cracking.

Three Columbia University business school professors, all firm believers in free market principles, have suggested a surprising way for media companies to maximize profits in the new broadband era.

In their new book, The Curse of the Mogul: What’s Wrong with the World’s Leading Media Companies, Jonathan Knee, Bruce Greenwald, and Ava Seave come to this conclusion regarding telecommunication infrastructure:

“An ideal world would consist of local hybrid networks—wireless and fiber—with exclusive territories cooperating across regional boundaries. The resulting structure would minimize costs, maximize potential service quality, and not coincidently generate high profits at reasonable profits.”

I interviewed one of the authors on my blog and she’s clear that her colleagues were not thinking about the advantages of publicly owned broadband facilities, indeed, would be opposed to the very idea, because they believe public agencies generally manage assets less efficiently than private companies. This may or may not be true, but policymakers may need to weigh the benefits of “efficient operations” compared to the benefits of several service providers sharing the costs of a broadband network, in the same way private airlines share the cost of publicly owned airports.

As we move into a new decade, advocates for municipal wireless and fiber broadband now have abundant, conclusive proof of the value of open access broadband policies, thanks to a Yale professor.  And, thanks to three business school professors, we now have the most concise, compelling summary of the case for public broadband I can ever imagine.

Happy New Year!

Links:

http://www.fcc.gov/stage/pdf/Berkman_Center_Broadband_Study_13Oct09.pdf

http://mediapolicy.typepad.com/media_policy_network/2009/12/the-moguls-curse-part-3.html

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Comments

  1. I appreciate your policy knowledge in both the public and private sectors. I might add that in the US when we say public this means government owned and private we mean corporate owned. I know in many European counties this means just the opposite. In my previous article: Year-end Review: Economic Recovery Through Municipal Wireless Networks I spoke of the real world requirements of public-private shared networks. This of course is from and need and technical view knowing that policy could and does stop progress of these services.

    I found when studying broadband stimulus grants awards that the federal public sector is realizing that they are good at one time capital support but not necessarily supporting sustainable broadband models. In fact, as I review many federal stimulus grants they require the supporting private sector partner to assure that the recurring network costs are supported by their sustainable business model. It seems that the public sector may be beginning to understand that they shouldn’t be in the network management business.

    Coming from the communication deregulation days in the US, is saw a lot of competition drive the building of our global fiber optic infrastructures when there was available capital. We are not in that position today and this is why we need to find some way to share all existing municipal, county and state public and private communication infrastructures. Different decisions for different times. We all know what to do but you are right about policy. The wrong policy decision can kill the best of intentions.