The US broadband lag

Australia may be low on the broadband ladder but we are in good economic company: the US. In the New York Times, Paul Krugman wonders how the US came to fall behind in broadband. And unlike our politicians, he doesn’t point to a lack of government money but instead a lack of adequate regulation and competition policy.

What happened to America’s Internet lead? Bad policy. Specifically, the United States made the same mistake in Internet policy that California made in energy policy: it forgot — or was persuaded by special interests to ignore — the reality that sometimes you can’t have effective market competition without effective regulation.

You see, the world may look flat once you’re in cyberspace — but to get there you need to go through a narrow passageway, down your phone line or down your TV cable. And if the companies controlling these passageways can behave like the robber barons of yore, levying whatever tolls they like on those who pass by, commerce suffers.

America’s Internet flourished in the dial-up era because federal regulators didn’t let that happen — they forced local phone companies to act as common carriers, allowing competing service providers to use their lines. Clinton administration officials, including Al Gore and Reed Hundt, the chairman of the Federal Communications Commission, tried to ensure that this open competition would continue — but the telecommunications giants sabotaged their efforts, while The Wall Street Journal’s editorial page ridiculed them as people with the minds of French bureaucrats.

And when the Bush administration put Michael Powell in charge of the F.C.C., the digital robber barons were basically set free to do whatever they liked. As a result, there’s little competition in U.S. broadband — if you’re lucky, you have a choice between the services offered by the local cable monopoly and the local phone monopoly. The price is high and the service is poor, but there’s nowhere else to go.

Meanwhile, as a recent article in Business Week explains, the real French bureaucrats used judicious regulation to promote competition. As a result, French consumers get to choose from a variety of service providers who offer reasonably priced Internet access that’s much faster than anything I can get, and comes with free voice calls, TV and Wi-Fi.

It’s too early to say how much harm the broadband lag will do to the U.S. economy as a whole. But it’s interesting to learn that health care isn’t the only area in which the French, who can take a pragmatic approach because they aren’t prisoners of free-market ideology, simply do things better.

We face the same problem here in Australia. If we have a broadband problem it is because we need to strengthen our regulatory muscle. Even the US has more hope because it has more competition. Here is where we are languishing behind.

3 thoughts on “The US broadband lag”

  1. The US may not have the fastest speeds but the overall service is still streets ahead of Australia. I live in a town of 10,000 people, 300 Km from Denver and I have both cable internet and two different DSL options. My cable for US$40 a month is 8Mb down and 1.5Mb up, and no one here has even heard of a download limit.

    on top of that I’ve been using VOIP as my home phone exclusively for two and a half years. For $20 a month it includes unlimited calls in North America and to landlines in Western Europe and several countries in Asia Pac including Australia.

    Think about that. It costs me less to call someone in Sydney from Colorado than it costs you to call them from Melbourne.

    So which country stuffed up telecoms regulation?

    P.S. and while I’m making you insanely jealous I’ve had a Tivo (or two) for over three years 🙂


  2. Dan, don’t get me wrong. We have it far worse here. My point was that the US is on a similar path.

    An iPhone would impress me. My TiVo is now over three years old.


  3. Well Dan, I’m glad you are so lucky to have because I live 80 miles from the Capitol and I have two options, dial-up or satellite which won’t allow me to use VoIP or VPN and I have a limit of 12000MB (rolling). All this because there is no competition. I live 2 miles from the cable line and 1 mile from a CO (relay station). So we are behind and need something to force the telcoms and cable to speed up. Go Sprint/Clearwire…. I had hoped Cell phones would be my hope but Verizon is scared to hurt their broadband business so they are limiting their service. I’m sure there will be a road block for WiBro/WiMax.


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