In Japan, wireless technology works so well that teenagers draft novels on their cellphones. People in Hong Kong take it for granted that they can check their BlackBerrys from underground in the city’s subway cars. Even in France, consumers have more choices for broadband service than in the U.S.
The Internet may have been developed in the U.S., but the country now ranks 15th in the world for broadband penetration. For those who do have access to broadband, the average speed is a crawl, moving bits at a speed roughly one-tenth that of top-ranked Japan. This means a movie that can be downloaded in a couple of seconds in Japan takes half an hour in the U.S. The BMW 7 series comes equipped with Internet access in Germany, but not in the U.S.
So those of us otherwise wary of how wisely the stimulus package will be spent were happy to suspend disbelief when Congress invited ideas on how to upgrade broadband. Maybe there are shovel-ready programs to bring broadband to communities that private providers have not yet reached, and to upgrade the speed of accessing the Web. These goals sound like the digital-era version of Eisenhower’s interstate highway projects, this time bringing Americans as consumers and businesspeople closer together on a faster information highway.
But broadband, once thought to be in line for $100 billion as part of the stimulus legislation, ended up a low priority, set to get well under $10 billion in the package of over $800 billion. This is a reminder that even with a new president whose platform focused on technology, and even with the fully open spigot of a stimulus bill, technology gets built by private capital and initiative and not by government.
The relatively small appropriation is not for want of trying. A partial list of the lobbying groups involved in the process is a reminder of how Washington’s return to industrial policy requires lobbying by all: the Information Technology Industry Council, Telecommunications Industry Association, National Cable & Telecommunications Association, Fiber-to-the-Home Council, National Association of Telecommunications Officers and Advisors, National Telecommunications Cooperative Association, Independent Telephone and Telecommunications Alliance and Organization for the Promotion and Advancement of Small Telecommunications Companies.
The result was a relatively paltry $6 billion for broadband in the House bill and $9 billion in the Senate, with each bill micromanaging the spending differently. The bills include different standards, speeds and other requirements for providers that would use the public funds. This may balance competing interests among cable, telecom and local phone companies, but it doesn’t address the underlying problems of too few providers delivering too few options to consumers.
Techies may be surprised by how these funds would be dispersed. The House would give the Department of Agriculture’s Rural Utilities Service control over half the grants and the Commerce Department’s National Telecommunications and Information Administration control of the other half. Tax credits would have been a faster way to make a difference than government agencies dividing spoils across the country.
The House bill also calls for “open access.” This phrase can include hugely controversial topics such as net neutrality, which in its most radical version would bar providers from charging different amounts for different kinds of broadband content. Now that video, conferencing and other heavy-bandwidth applications are growing in popularity, price needs to be one tool for allocating scarce resources. Analysts at Medley Global Advisors warn that if these provisions remain in the bill, “it will keep most broadband providers out of the applicant pool” for the funds intended specifically for them.
More fundamentally, nothing in the legislation would address the key reason that the U.S. lags so far behind other countries. This is that there is an effective broadband duopoly in the U.S., with most communities able to choose only between one cable company and one telecom carrier. It’s this lack of competition, blessed by national, state and local politicians, that keeps prices up and services down.
In contrast, most other advanced countries have numerous providers, using many technologies, competing for consumers. A recent report by the Pew Research Center entitled “Stimulating Broadband: If Obama Builds It, Will They Log On?” concluded that for many people, the answer is no, often due to high monthly prices. By one estimate, the lowest monthly price per standard unit of millions of bits per second is nearly $3 in the U.S., versus about 13 cents in Japan and 33 cents in France.
We’re told that we now live in an era of more regulation and more government spending, but neither approach is how problems get solved in technology. Government mandates on how networks should be operated and subsidies administered by USDA aren’t going to ensure broadband access, make connections faster, or lower prices.
What we need to get the U.S. back into the top ranks of wired countries is more competition, not taxpayer handouts. That would be a real stimulus. WSJ