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July 23, 2009 9:18 AM

"Hundreds of Billions" Invested In Broadband And Yet We Still Lag Behind

In starting to peruse the reply comments to the FCC on formulating a national broadband policy, something NCTA said caught my eye, namely that the FCC should acknowledge that one of the many successes in the broadband marketplace has been the hundreds of billions of dollars invested by private operators in building broadband networks.

While I appreciate the sentiment that a deregulatory attitude towards broadband has spurred massive investment in a variety of networks, I'm having a hard time resolving this with the fact that the US is nowhere near the top five in terms of broadband rankings.

Of course, how one ranks broadband is an area of controversy, but I think it's safe to say that based on sheer capacity or price-per-megabit of service, the US lags far behind leaders like South Korea and Japan, regardless of any other factors.

So with this in mind, instead of being impressed by the hundreds of billions spent by private industry, I can't help but wonder if as a country we've spent that money wisely.

To further put this into context, the highest estimate I've heard for what it would take to lay a fiber pipe to every last home in America is $500 billion. Regardless of the merits of DOCSIS 3.0-enabled cable or next-generation DSL service, there's no denying that full fiber networks are the gold standard of broadband as no other technology has the capacity, reliability, and scalability of fiber.

Taking this a step further, I can't help but wonder: what would've happened if instead of focusing on facilities-based competition, which dilutes investment across multiple technologies, we had concentrated all this investment on creating a Full Fiber Nation?

Given that hundreds of billions have already been spent, I'd think that would mean we could be at least halfway, maybe even further, to this goal by now if we'd been able to focus on encouraging competition between services over a common infrastructure vs. between last-mile technologies.

Of course, many of you reading this are likely guffawing at the idea that we could ever unite private investment, but I should mention now that I have a different way of looking at private vs. public investment. In the end, I see all of those dollars as coming from our pockets. Whether it's money we pay a company for services or products that they can then invest, or that we pay in taxes that the government then spends, the money is ultimately all coming from us, the users.

That's a big reason why I'm largely non-ideological about who's doing the investing in building out broadband infrastructure. All I care about is that this investment is done well and with the public's best interests in mind.

Back to NCTA's boasting about hundreds of billions being invested: I can't get excited about that knowing how relatively little we have to show for it. Hundreds of billions of our dollars have gone to creating a broadband marketplace where competition is inherently limited (because of the high cost of deploying new networks) and very few people have access to world-class broadband.

So rather than being impressed by the amount of money put out by private operators, I'm depressed by the results of that fragmented investment. Rather than seeing that big number as a reason to maintain the deregulatory status quo, I'm left wondering if there's a better way to push our country's broadband future forward.

And despite the fact that I respect the hard work and big risks undertaken by the private sector to get us where we are in terms of connectivity, I can't help but ask myself the question: is it time to reconsider our emphasis on facilities-based competition and start looking at how we can concentrate the investment of our dollars on bringing the best possible broadband to all Americans?

I'm not necessarily saying that building a common open infrastructure is the ultimate answer, just that I think given how much we've already invested relative to how much (or little, rather) progress we've made in getting the country wired that it might behoove us to at least consider new possibilities like this.

Now is not the time to allow tired dogma to trump the serious consideration of new ideas. In going through the process of formulating a national broadband policy, all options should be on the table. There should be no sacred cows. Not even that facilities-based competition is the undisputed best way to spur investment in broadband networks.

Because while taking this approach has led to billions of dollars being invested by the private sector in building out all sorts of broadband technologies, when looked at from an international perspective it's hard not to feel as though that as a country we're not realizing the full return on that investment of our dollars.

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Comments (1)

Geoff, You've made it over the final hurdle. Congratulations!

Competition is not going to get us where we need to go.

Even three network providers (which, miracle of miracles we may get in Lafayette) are NOT ENOUGH. Economist that I'd consider reputable do not think that 3 is enough to make price competition, the only real competition, happen. Market segmentation occurs instead, even in markets where transport is not the prime cost. In markets where the construction of an elaborate transport system is the vast majority of the "cost" of providing the service counting on competition is plain, flat, dumb. It's not hard to see why once you can get past the idea that competition is the magic elixir for all problems great and small:

The best way to see this is via analogy is to the water utility. Water is cheap...effectively free for the pumping. The only cost is in its transport. Which is hefty and requires major, expensive construction and massive reconstruction at regular intervals. Building 3 complete water plants is just dumb. You'd only assure yourself that -- at a horrible "best" you'd pay 3 times as much for water as is necessary. In reality some one company get a marginal advantage over another drives the other two into the ground as it leverages its small advantage into a decisive one. Only regulation can stop this and what you end up with is 3 ailing networks and a cost to the consumer of 3x. Sans regulation two networks eventually collapse into ruin and (remember we are sans regulation) the remaining monopoly gouges the public. But maybe only by 2x. Happy days? NO. It would have been far wiser to build a public water utility built to minimize cost and maximize public safety. That's pretty much what our grandparents and their parents did. Would that we had half their good sense.

Same for electricity, a generation later, though we mostly ended up with regulation there.

In telecoms at least the last mile, and probably the middle mile is a natural monopoly of this type. Huge expenses for infrastructure. Minuscule costs for each bit transferred. Duplicating last mile fiber networks is straight-on wasteful.

Lafayette is traveling the water system route. The only practical plan for the rest of the country is to try and for the regulation that sorta works for electricity. The current idea that we can get competition in this area that will solve our problem is a phantasm. The country is paying—and our grandchildren will pay—for our self-indulgent fantasy that competition is going to ride in on a white horse and save us without any hard choices on anyone's part.

It just doesn't work that way.

Posted by John on July 25, 2009 1:30 AM

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