Not So Fast, Europe – No, Really, It Isn’t, Says Prof. Chris Yoo

by Mike Wendy on June 6, 2014

Though groups like the Internet Society cling to the notion – “Why is European broadband faster and cheaper? Blame the government” – and traffic in the meme that the only true broadband experience is government-pushed fiber-to-the-premises (FTTP), University of Pennsylvania’s Christopher Yoo sees it differently.

In Yoo’s new data-driven study, “U.S. vs. European Broadband Deployment: What Do the Data Say?,” the Professor puts the European myth to rest, finding, among a host of other observations, that:

• High-Speed Access: A far greater percentage of U.S. households had access to Next Generation Networks (NGA) (25 Mbps) than in Europe. This was true whether one considered coverage for the entire nation (82% vs. 54%) or restricted the analysis to rural areas (48% vs. 12%), suggesting that the U.S. approach proved more effective than the European approach at narrowing the digital divide. (Emphasis added)

• Fiber and LTE Deployment: Turning to specific technologies, the data indicate that the U.S. had better coverage for FTTP (23% vs. 12%) and for the fourth-generation wireless technology known as Long-Term Evolution (4G LTE) (86% vs. 27%). Furthermore, empirical analysis claims the position that the provision of high-speed Internet depended exclusively on fiber. In short, FTTP remained a minor contributor to NGA coverage, and those countries that emphasized fiber were the bottom broadband performers among the eight European countries studied. (Emphasis added)

• Regulatory Policies and Competition Models: Disparities between European and U.S. broadband networks stemmed from differing regulatory approaches. Europe has relied on regulations that treat broadband as a public utility and focus on promoting service-based competition, in which new entrants lease incumbents’ facilities at wholesale cost (also known as unbundling). The U.S. has generally left buildout, maintenance, and modernization of Internet infrastructure to private companies and focused on promoting facilities-based competition, in which new entrants are expected to construct their own networks. Regression analysis indicates that the U.S. approach has proven more effective in promoting NGA coverage than the European approach. (Emphasis added)

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Why is this study important?

As you may know, the FCC has embarked, yet again, on trying to impose Net Neutrality regulations on the Internet ecosystem  in order to boost broadband deployment and uptake.   Many pushing for these rules want a European-styled / FDR-era approach to regulation, which treats network providers like Verizon, AT&T, and Comcast, as well as 1,500 other U.S. ISPs, as heavily regulated, old-fashioned telephone providers.

Yoo’s work suggests that that regulatory approach hasn’t worked in Europe, and it likely won’t work here either.

Last June, Verizon’s CEO, Lowell C. McAdam, made a similar observation, stating in a New York Times opinion piece:

Since 1996, as America encouraged the growth of its broadband industry, European regulators have adopted policies that generally limited network infrastructure deployment to a single facility in a given country or region. Other companies were allowed to “resell” broadband services to consumers, but only if they used the same infrastructure. This “retail” competition resulted in prices that may have covered the costs of operations but left little capital or other incentive for companies to invest in improving these networks. In other words, a decade ago the European broadband market may have looked healthy from the standpoint of consumer pricing, but after 10 years of underinvestment, European households (only half of which have access to networks capable of speeds of even 30 megabits) have far fewer broadband options and innovations than their American counterparts.

Regulatory prudence is the only way to keep up the momentum in broadband innovation.

Whatever (needless) Net Neutrality rules emerge from the FCC by year’s end, one hopes that they are, at the very least, prudent, and, most certainly, not European in flavor and approach.

U.S. broadband growth will not continue via the Old Country’s “faster-cheaper,” Title ll-like model.  That is a false economy we cannot afford.

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