Pro-business think tank: US broadband market is peachy-keen

You've heard the claim: the US is behind when it comes to broadband in every area that counts. In price, speed, and availability, the US is getting whooped by Japan, Korea, and 13 other countries, according to widely-quoted OECD numbers. And what's worse is the fact that the US has been dropping in the rankings over the last five years. A new report out today from the Progress & Freedom Foundation suggests that everything you know is wrong, that US broadband is (or should be) the envy of the world, and that infrastructure competition always trumps line-sharing. Also, it uses the phrase "regulatory teat." HangZhou Night Net

This isn't the sort of report worth reading if you're only interested in the conclusion, since all PFF reports have the same conclusion: regulation bad, free market good, scare quotes around things like "public interest groups" (and, occasionally, the suggestion that Lawrence Lessig is a communist). This report is true to form.

But it is a clear summation of the other side of the argument, pulling together, in 17 pages, all the data that suggests that the US broadband situation isn't as dire as some critics make it out to be. For instance, the US satisfaction score with broadband service is actually one of the highest in the world.

The basic claim is that the FCC's agenda of pushing facilities-based competition (such as that between cable companies and telcos, for instance) is the right one, and that line-sharing is only a measure of last resort to be used where facilities-based competition is hard to come by. There's some interesting data presented to support this claim, and it certainly seems true that strong infrastructure competition spurs more investment than line-sharing rules, which can dampen it in some cases.

But one of the main examples of this in action is the current round of cable upgrades to DOCSIS 3.0, which are approvingly mentioned as reactions to Verizon's FiOS (fiber) deployment. And that's certainly true, but it also illustrates the basic problem with the "infrastructure competition solves all our problems" approach: FiOS is only available in very limited areas, and Comcast is the main cable company making aggressive DOCSIS 3.0 moves.

Facilities-based competition is great when it exists, but the PFF piece is too quickly dismissive of the idea that a local telco and a cable company might find it easier not to truly challenge each other in many markets. In fact, if it weren't for FiOS—an $18 billion project that aroused tremendous analyst resistance, remember—there would be far less competitive incentive for cable operators anywhere in the US to invest in major upgrades. This is demonstrated by Time Warner Cable's decision to only deploy DOCSIS 3.0 in areas where it faces direct competition from FiOS for the time being.

The report rightly stresses the importance of wireless, though, as a force that needs to be considered in these infrastructure debates. Unfortunately, even as someone who uses and loves a Verizon EV-DO 3G wireless modem, it's clear that wireless broadband isn't ready to replace wireline links for a number of years. The new Clearwire, which has joined with Sprint's XOHM WiMAX unit, will push this business model, and we have seen encouraging signs that the cell carriers are opening up their networks to any device and any use.

These things will happen, but they will take time to become mainstream. When that day finally does come, though, robust infrastructure competition should become a reality. Wireless, after all, isn't just a new method of connection, it's many new methods, and it's far more competitive than most wireline markets (owing to no last-mile issues).

When wireless comes into its own and is explicitly marketed as a replacement for wired Internet service at home, we'll have three, four, or five competitors in each market. Wireless operators may not bring much speed pressure to bear on the wireline incumbents, but they will certainly depress prices.

Further reading:A recent report from the nonpartisan ITIF on the same subjectHigher ed IT managers think what's needed is fiber to every homeThe PFF report concentrates on debunking the OECD numbers, but the US isn't doing all that hot by many different metrics

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