A Broadband Beat-Down (NYT June 25 | RSS)
It looked for a while as if the United States was firmly entrenched as the world’s leader in Internet innovation. President Bill Clinton and Al Gore, his vice president, did much to encourage development of the country’s technology infrastructure, writes Thomas Bleha in an article accessible on the Foreign Affairs magazine Web site (www.foreignaffairs.org).
From the 1960’s until the day President Bush took office, he writes, “The United States led the world in Internet development.” No longer. The Bush administration’s policies, or lack thereof, have since allowed Asia – Japan in particular – to not only catch up in the development and expansion of broadband and mobile phone technology, but to roundly pound us into the dirt. “The lag,” he diplomatically asserts, “is arguably the result of the Bush administration’s failure to make a priority of developing these networks.”
Japan instituted what used to be called an industrial policy, which provided incentives for expanding broadband and wireless technology to the masses. The United States, meanwhile, has done essentially nothing. Japan is now well ahead of us in the percentage of homes with broadband. And their broadband on average is about half the price and 16 times the speed of ours. Japan is even further ahead in mobile telephony. “U.S. mobile phone service remains awful by European, let alone Japanese, standards,” writes Mr. Bleha, who served as a Foreign Service officer in Japan for eight years and has a forthcoming book on the subject.
Meanwhile, Japan, South Korea and other Asian countries are poised to leap ahead of the United States in any number of areas: teleconferencing, telecommuting, remote medical services, distance education, multimedia entertainment.
The economy as a whole is at risk because of broadband shortcomings, says Charles H. Ferguson of the Brookings Institution (brookings.edu). Last year, he asserted in a book, “The Broadband Problem,” that the United States might lose up to $1 trillion because of constraints on broadband deployment.
Please, spare me the cries for “industrial policy.” We heard this throughout the 1980s and well into the 1990s, when Japan’s economy went into a decade-long tailspin. The advantage of having government make technological decisions and then subsidize them is that everyone can get on a standard system and be able to invest in it without fear of backing the wrong horse. The disadvantage, though, is that that system might be inferior to the one that finally emerges in a competitive market.
While I haven’t seen Ferguson’s book, he had a working paper on this topic three years ago (h/t Steve M.). Ironically, it points out that most of the problems the U.S. has had in this area stem, not from a lack of central regulation but, on the contrary, too much:
First, the pace of deployment and technological progress in broadband services remains seriously inadequate. Second, the principal source of this problem is the monopolistic structure, entrenched management, and political power of the incumbent local exchange carrier (ILEC) and cable television (CATV) sectors, worsened by major deficiencies in the policy and regulatory systems covering these industries. Third, this is a truly important issue. Failure to improve broadband performance could reduce U.S productivity growth by 1% per year or more, as well as reducing public safety, military preparedness, and energy security. And finally, structural reforms in industry, policy, and the U.S. regulatory system are required. Appropriate policy measures include structural separation of switching, enhanced services, and data transport in the telephone industry; divestiture of content from< transmission in the CATV sector; mandatory open interfaces for interconnection; increased financial transparency and disclosure; and reforms in regulatory systems to increase their efficiency, high technology expertise and political independence.
Some of those problems have been addressed–although by no means solved–with legislation that has come out since. During the evil Bush Administration, no less.
Further, even though it’s incredibly obvious, analysts who compare the United States to Japan or to countries in Western Europe seem to always miss the fact that the United States absolutely dwarfs those places in geography. Getting broadband and cellular access to rural South Dakota is a hell of a lot harder than getting it to the rural areas of Denmark or Japan.
(The Foreign Affairs site is down as I write this. I’ll check the article later and may add more if warranted.)
