America: A Broadband Backwater

Thomas Bleha's story in the May-June issue of Foreign Affairs proves essential reading (esp since the publication is held in such high esteem among influential DC wonks). While he seems intent on skirting the municipal broadband issue, he gives thorough background on how an industry-friendly FCC and White House failed to open the sector to healthy competition.

Some pointers:

In the first three years of the Bush administration, the United States dropped from 4th to 13th place in global rankings of broadband Internet usage. Today, most U.S. homes can access only "basic" broadband, among the slowest, most expensive, and least reliable in the developed world . . .

In the industry's pocket, our leaders refuse to take decisive action:

. . . In the administration's first three years, President George W. Bush mentioned broadband just twice and only in passing. The Federal Communications Commission (FCC) showed little interest in opening home telephone lines to outside competitors to drive down broadband prices and increase demand. . .

Meanwhile, the US falls to the back of the pack:

. . . It is now clear that Japan and its neighbors will lead the charge in high-speed broadband over the next several years. South Korea already has the world's greatest percentage of broadband users, and last year the absolute number of broadband users in urban China surpassed that in the United States. . .

. . . It is these countries, rather than the United States, that will benefit from the enhanced productivity, economic growth, and new jobs that high-speed broadband will bring. . .

And loses out on billions in economic benefits:

. . . In 2001, Robert Crandall, an economist at the Brookings Institution, and Charles Jackson, a telecommunications consultant, estimated that "widespread" adoption of basic broadband in the United States could add $500 billion to the U.S. economy and produce 1.2 million new jobs. But Washington never promoted such a policy. Last year, another Brookings economist, Charles Ferguson, argued that perhaps as much as $1 trillion might be lost over the next decade due to present constraints on broadband development. . .

Bleha thinks its because the broadband monopolies and duopolies refuse to open their lines to market competitiors:

. . . regional telephone companies relentlessly tried to reverse some of the promising measures that had been taken under President Clinton. Continuing efforts they had launched after the 1996 Telecommunications Act was passed, they lobbied legislators and sought court decisions to overturn regulations that had forced them to open their residential telephone lines to competitors. . .

. . . at the urging of regional telephone companies, a court reaffirmed an earlier ruling that these companies need not share their residential lines with DSL competitors. Although many expected an appeal, higher levels of the administration chose not to challenge the decision. Thus, broadband competition over residential telephone lines was effectively killed. A proven strategy had been lost. . .

The reasons for industry reluctance to provide ubiquitous broadband are simple, Bleha states:

. . . cheap, high-speed broadband would lead to widespread use of Internet telephones and thus threaten the phone companies' lucrative voice-telephone business, and more inexpensive broadband would multiply outside video and movie offerings and endanger the cable companies' profitability. So, although both the telephone and cable companies could provide cheap, high-speed broadband if they chose to, they are not rushing to develop it.

While Bleha's conclusion puts far too much faith in the President's Information Technology Advisory Committee -- a group of private-sector IT leaders and academics -- to take decisive action to advance broadband deployment, he does paint a fairly complete picture of America's broadband bungling.