[RTC List] Open Up Highways

[Doug Rose]

My wife Patti found this article and wanted to let others see it.

Open up those highways 

The Economist – January 19th, 2008 – Page 65 

Rapid internet services are a boon. But not all regulators understand them

IN ERAS past, economic success depended on creating networks that could
shift people, merchandise and electric power as efficiently and as widely as
possible.
Today's equivalent is broadband: the high-speed internet service that has
become as vital a tool for producers and distributors of goods as it is for
people
plugging into all the social and cultural opportunities offered by the web. 

Easy access to cheap, fast internet services has become a facilitator of
economic growth and a measure of economic performance. No wonder, then, that
statistics
show a surge in broadband use, especially in places that are already
prosperous. The OECD, a rich-country club, says the number of subscribers in
its 30
members was 22im last June-a 24% leap over a year earlier. But it is not
always the most powerful economies that are most wired. In Denmark, the
Netherlands
and Switzerland, over 30% of inhabitants have broadband. In America, by
contrast, the proportion is 22%, only slightly above the OECD average of
just under
20%. 

In terms of speed, Japan leads the world. Its average advertised download
speed is 95 megabits per second. France and Korea are ranked second and
third,
but are less than half as fast, and the median among OECD countries is not
much more than a tenth. America's average speed is supposed to be a bit
above
the median, but most users find that it isn't, or that the faster speeds are
vastly more expensive. A New Yorker who wants the same quality of broadband
as a Parisian has to pay around $150 more per month.

What accounts for the differences among rich countries? Two or three years
ago demography was often cited: small, densely populated countries were
easier
to wire up than big, sparsely inhabited ones. But the leaders in broadband
usage include Canada, where a tiny population is spread over a vast area.
The
best explanation, in fact, is that broadband thrives on a mix of competition
and active regulation, to ensure an open contest. 

A lack of competition-boosting oversight is one reason for the poor record
of the United States (and indeed for New Zealand, another unexpected
laggard).
Most Americans have a choice of only two broadband providers, either a
telecoms or a cable operator. This virtual duopoly suits both sorts of
provider,
and neither has raced to offer its customers faster access. In some American
states, prices have risen; in most other countries they have dropped. 

In theory, America's 1996 Telecoms Act obliged operators to rent out their
lines to rivals; in practice, a regulatory decision and then a court ruling
(in
2003 and 2004 respectively) have made it easy for operators to keep
competitors out. The supposed aim of these decisions was to force new firms
to build
their own infrastructure, instead of piggybacking on facilities set up by
older outfits. But new entrants have found it hard to join the fray. 

In any event, those American rulings may have been based on a faulty idea of

how competition works in this area. As Taylor Reynolds, an OECD analyst,
puts it, innovation usually comes in steps: newcomers first rent space on an
existing
network, to build up customers and income. Then they create new and better
infrastructure, as and when they need it. 

In France, for example, the regulator forced France Telecom to rent out its
lines. One small start-up firm benefited from this opportunity and then
installed
technology that was much faster than any of its rivals'. It won so many
customers that other operators had to follow suit. In Canada, too, the
regulator
mandated line-sharing, and provinces subsidised trunk lines from which
smaller operators could lease capacity to provide service. 

In South Korea, where half the population lives in flats, each block owns
its own internal cabling and allows rival operators to put their equipment
in
the basement; each tenant then chooses which to use. In Japan, politicians
put pressure on the dominant operator, NTT, to connect people's homes by
high-speed
fibre lines. And this week the communications ministry indicated that it
will make NTT open those fibre connections to rivals. 

As broadband grows more popular, the political mood may change in many
countries. At present, consumers are often misled by the speeds that
operators promise
to deliver. Soon regulators can expect to face pressure to ensure truth in
advertising, as well as to promote easier access. 

Pressure will also come to correct another problem: most operators cap the
amount of traffic users may send and receive each month, and nearly all
provide
far less speed for sending than for receiving. In other words, broadband
doesn't really offer a two-way street. This will matter more as users turn
into
creators of content, from videos to blogs, and ask to be treated with due
respect. •

Doug Rose  
Rose Communication Services 
http://www.rosecoms.com 
Phone: 707-839-0588 
Cell phone: 707-498-6482 
mailto:drose at rosecoms.com