European Countries Leave U.S. Trailing in Race for Universal Broadband
Submitted: March 11, 2010 - 8:44pm
Originally published: March 11, 2010
Last updated: March 11, 2010 - 8:47pm
Originally published: March 11, 2010
Last updated: March 11, 2010 - 8:47pm
Source:
BroadbandBreakfast.com
Author:
Philip Hunter
Location:
Organisation for Economic Co-operation and Development, 2, rue André Pascal, Paris, France
European countries are adopting measures to reach 100 percent broadband penetration and they're going to reach that goal well before the United States.
This is partly because European regions tend to be more densely populated, often with shorter distances to their remote communities. Some have fewer topographic challenges than others, making it easier to bring broadband to all homes. However, in many cases Europeans are benefiting from firm commitments from local and central governments that began as many as 10 years ago. Such commitment led Finland to become the first European country to legislate for universal broadband in October 2009, requiring telecommunications firms to provide residents with access at 1 megabit or more by July 2010. By December 2010, each region will have a telecom firm subject to a Universal Service Order, as defined by the European Union in its i2010 strategy to heal the digital divide among its member states. Others are following Finland's move. Austria set a target of 25 mbps for its residents by 2013, aiming to achieve this through legislation stimulating wholesale provision and cooperative ventures between operators.
Universal provision is certainly far easier for some countries to provide than others. Finland was well placed since 96 percent of its people were already within reach of broadband by 2005. Some, including the United Kingdom and the Netherlands, now have virtually 100 percent coverage anyway, compared with 98.5 percent in France, 95 percent in Germany, and just 82 percent in the United States, according to a report from the Organization of Economic Cooperation and Development.
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The National Broadband Plan harks back to the Rural Electrification Administration (REA), a New Deal program that congress created to bring electricity to rural areas — mostly farming households. Urban power-generation utilities had refused to extend their power lines to rural areas because they didn’t see any profit, so the REA provided workers, engineers, and loans so that rural communities could build and operate their own electrical grids (USDA).
What is the problem we are trying to solve & why would mandating high speed broadband in every home solve it? (Put slightly differently, isn't what happens in Finland only relevant if it shows us how to solve a problem we face?)
One possible problem (which should be demonstrated rather than asserted) is that present suppliers use market power to set prices too high, thereby cutting off efficient demand. But mandating supply without price & quality controls would not solve that problem. (Consider what is meant by high speed broadband. Is, as the article suggests, 1 Mb/s the magic number? Should a maximum or average speed be mandated, and if average, how should that be defined? Should data caps be allowed (since the cost of achieving a bandwidth target can be progressively lowered by imposing data caps that don't affect 95% or 85% etc. of users)? What about outages, time to connect and disconnection for unpaid bills?)
Thus, mandating service requires command and control regulation over price and quality, but such regulation is well-known to have high efficiency costs.
Instead, if inefficiently high prices are the problem, then alternative policies make much more sense, notably, removing artificial entry barriers, eg, by releasing spectrum to non-dominant players.
Another possible problem could be a social failure, rather than lost economic efficiency: eg, perhaps a compelling argument is made (rather than asserted) that social justice requires supply to low-income consumers who won't purchase broadband at competitive prices. In that case, it is again well-known that transparently provided subsidies to low-income individuals are more efficient than mandated supply.