The UK Broadband Infrastructure And the Debate We Should Be Having.

This article from the London Times is useful both for its substance and for what it says about the sorry state of the debate in the U.S. While the U.K. has much higher available penetration and speed than the U.S., it is considered rather pokey and slow for Europe. As the article observes, the problem is that private companies don’t want to invest in upgrades of infrastructure.

More below . . .

At this point in the U.S., the discussion then becomes about how and whether to provide incentive for private companies to invest. The “regulation is death” crowd will observe that while structural separation (separating the ownership of the broadband lines from the sale of retail services) may have brought the U.K. higher speeds, lower prices, more competitive offerings, and all around better services than in the U.S., it has discouraged infrastructure investment and therefore is inherently unsustainable and a real bad idea. We then get caught up in the debate about producer incentives, past occasions when the carriers promised investment in exchange for deregulation and failed to deliver, yadda yadda yadda. Because, of course, we only have on possible business model and one role for government policy in broadband.

The Times article is noteworthy because it takes the discussion in an entirely different direction. It begins by noting that a public/private cooperative in a town in the Netherlands built itself a 100 mbps network that turns a tidy profit even after major upgrades, and that its structure as a cooperative keeps it accountable to the residents — who are voting shareholders. The article contrasts this with the UK’s “do nothing” recommendation. But rather than calling for the end of structural separation and a “hands off” government approach, the piece concludes by urging a debate around the diverse models of public private partnership and a call for greater public investment.

Compare this to the paucity of the debate here in the U.S., where the Chicago School — which equates a deregulated market with a competitive market and sees no role for government in economic policy beyond enforcing contract — continues to set the agenda and our broadband policy debates remain relegated to debating tweaks around the edges. In Europe, they can actually talk intelligently about a wide variety of possible approaches. Whereas here, we cannot even get past the underlying question of whether government has a role at all — let alone recognize the possible diversity of public/private approaches. Abroad, the debate is “what should we have as a broadband policy.” Here, it is “how dare we have the hubris to imagine we could have a broadband policy other than deregulation — don’t you know that government screws everything up and you should be ashamed at the notion of having an industrial policy.” Our spectrum “debates” are reduced to relentless chanting about not “picking winners” or “favoring business models” in the face of the most timid proposals to the contrary. Efforts by local governments to find their own solution face implacable hostility and insistent demands that localities outsource to the private sector or prove success by operating like a private sector company.

The refusal of relevant members of Congress or regulatory agencies to even question the underlying validity of the Chicago School, the insistence on accepting the basic frame that government has no role but to get out of the way and that advocates of any approach to the contrary bear a heavy burden of proof, has trapped our national debate like a fly in amber. Meanwhile, we fall further and further behind, losing our edge to nations having substantially different debates. Yet rather than question the Chicago School frame, we endless debate the validity of the metrics tracking our decline. Or, to paraphrase Thomas Jefferson: It is easier in Washington to believe that the OECD rankings lie than to believe there is value in having an industrial policy.

I don’t know which is worse. That folks in the U.K. are complaining about the kind of broadband access I can only dream about as being inadequate, or that they are apparently capable of having the more sophisticated policy debate that I can only dream about. Still, if I may be audacious enough to hope, perhaps we will see better times ahead. The economic consequences of the Chicago School’s deregulatory approach do eventually change people’s attitudes. Just ask the financial services industry what they think of the virtues of deregulation these days.

Stay tune . . . .

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4 Comments

  1. barry payne says:

    the usual Chicago interpretation of the $65B bait and switch downfall of CLECs per the ’96 Tele Act is that Big Tele refused to invest because it expected facilities would have to be shared … or further back with the ’84 AT&T breakup, the local Bells should have been deregulated along with long distance for similar reasons … it’s always a gov/investment suppression problem with a dereg solution, also used to rebut claims of market failure since the market was never allowed to break free from gov … and when it does, creative destruction will take care of buildouts and technological upgrades, and when it doesn’t, Big Tele is willing to plan the obsolescence of copper networks for as long as it takes Billy Tauzin to jump to Big Pharma

    as long as “market failure” is regarded at the FCC, FTC and other agencies as lightweight fodder cast in transparency and consumer education terms, serious comprehensive policies necessary to encourage optimal investment in structurally separated broadband will stay off the radar as providers hold hostage consumers, regulators and legislators for every dollar they do invest in overpriced, undersupplied networks

    there may be hope from areas like Powell, Wyoming, where Quest and Bresnan (Comcast) were stiffed for city-wide FTTH financed by municipal bonds to be provided and managed by a provider named TCT, which apparently ruffled feathers all around and remains to be seen what is comparable to the Netherlands et al … but at least that’s where the real push back to the big tele/cable duo begins, at the last mile

  2. Casey Lide says:

    Bravo, Harold. The Chicago School deserves more criticism like this.

  3. Brett Glass says:

    The network in Powell, Wyoming is a scam. A bunch of slick salespeople rode into town, sounding like Professor Harold Hill from the Music Man, and convinced the City to give all of its business to, and subsidize, their network. They then closed the network to competition, allowing only TCT West to provide service over the infrastructure. (So much for open, provider-neutral infrastructure, eh?) So, the project is really just one company’s buildout. The city government is subsidizing that one company at the expense of current and future competition. Our ISP, which wants to spread throughout Wyoming, will likely never provide service in Powell, because the largest single customer is sewn up and the city government has subsidized another provider. We won’t compete on an un-level playing field. We hope they’re happy with their little sweetheart deal, because if it does not work out (and the financial projections look completely unrealistic to us) we aren’t going to come and bail them out.

  4. James Carlini says:

    Economic development equals broadband connectivity and broadband connectivity equals jobs – James Carlini.

    If we are to stay competitive in a global marketplace, we MUST update the network infrastructure where it is second-to-none again.

    Having said that, there is an obstruction to true infrastructure development and that is the powerful lobbying group of the incumbent telephone companies. They have been around for decades and they know their way around legislators to get things done.

    This is something that those proponents who want to build a national strategy seem to ignore or maybe not even realize is out there.

    When the Bell System was a monopoly, it was the best in the world. The Divestiture came (1984) and national standards fell to the wayside. Seven regional companies went in different directions from accepted central office equipment as well as marketing approaches. (there were central office interoperability issues and things like ISDN never got to where they thought it would as far as implementation and acceptance)

    Bell Labs was sold off and Lucent was bought out.

    Bottomline – it was not a smart move and now with the buying up of others by SBC it has become sort of a “Revestiture” of the System. In 24 years, the “Network” has fallen behind as far as its technological superiority to anything else out there.

    The talent and complex skills of the Bell System are long gone and what is now AT&T does NOT have the corner on all the talent anymore (even though they may think they do – they don’t).

    We need to re-build the network (public/private venture?)and not agree to any half-way measures that do not get us to setting the world standard again.

    The idea of “community networks” is only good if very strict national standards are adhered to because the worse thing would be to have a patchwork of semi-compatible networks with varying maximum speeds and incompatible equipment.

    A national strategy is the right approach if EVERYONE buys into it. (National standards and national speed goals. Not a patchwork approach.)

    This should also be viewed as a non-partisan issue and one more of national security and national economic development.

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