U.S. Competition Beats EU Regulation in Broadband Race

Published June 21, 2013

They were so wrong. To justify FCC market intervention, U.S. proponents of EU-style, heavy-handed broadband regulation trumpeted the narrative that the U.S. was falling behind the world in broadband.

The pro-regulation chorus of Free Press, Save the Internet, Public Knowledge, Susan Crawford, the Harvard Berkman Center, et al, sung from the same made-up song sheet that American business was failing and Government needed to take control of broadband networks to restore American leadership and prevent private enterprise from discriminating and censoring Americans free speech.

Now we know how tall a tale these pro-regulation pressure groups were willing to spin to advance their interventionist net neutrality agenda.

Facts are pesky things and the facts show that the U.S. is strongly leading the EU in the broadband race. It is so obvious even top EU officials admit the EU “needs to catch up.”

Let’s review the latest facts.

From an NYT op-ed by Verizon’s Lowell McAdam, “How the U.S. Got Broadband Right,” we learn that 80% of Americans have access to broadband networks offering 100 Mbps compared to 2% in the EU. The piece goes on to explain how America’s competition approach fueled $1.2 trillion in U.S. broadband investment over seventeen years, in stark contrast to the EU’s heavy-regulatory approach that has  starved broadband capital investment by forcing consumer prices well below economically-sustainable levels long term.

From a recent Philly.com op-ed by Comcast’s David Cohen, “U.S. the leader on broadband,” we learn that America leads the world in wired broadband access with 94% of Americans having access, and that 90% of Americans enjoy access to wired and wireless offerings. We also learned Americans now pay 87% less per mbps than they did eleven years ago.

Per a recent WSJ story, “Europe is losing the 4G race,” we learn that the U.S. has ten times more LTE penetration than the EU (19% to 2%), and that American LTE speeds are 75% faster than the average EU LTE speeds are. France Telecom’s Deputy CEO said: “It’s humiliating – we’re behind… the web was mainly invented by a European, but the big companies are American and the fastest networks are in the U.S. and Asia.” We also learned that the EU has long-underinvested, by about a third, for telecom infrastructure relative to the U.S. — per a McKinsey study.

What does this mean for the EU’s next move and how could that next EU move affect U.S. braodband?

The Financial Crisis has only exacerbated the EU’s previous 33% under-investment in broadband relative to the U.S.

A few months ago, the EU cut its proposed government funding for EU broadband infrastructure investment by 88% for the next seven-year EU budget spanning 2014-2020. “Such a smaller sum does not leave room for investing in broadband networks” said Europe’s digital commissioner Nellie Kroes.

Ominously for the EU and the U.S., the EU response to falling so far behind in broadband network modernization, has been to double down on even more broadband regulation rather than learning from America’s broadband success, and embracing broadband competition policy.

Moreover, EU regulators recently have proposed to ban mobile roaming charges, which would eliminate yet another key funding source for mobile infrastructure upgrades to 4G LTE.

And even more problematic for broadband investment, EU regulators now plan to implement net neutrality regulation for broadband services in the EU market for its ~500m consumers.

For the EU, this apparent political addiction to regulatorily driving down consumer prices for communications services, without regard to economics, means that the EU’s broadband infrastructure will continue to stagnate and fall further behind that of America and Asia – in wired and wireless.

So how could this possibly be ominous for U.S. broadband?

Since the EU is already pushing net neutrality regulation of broadband and set on banning mobile roaming charges in the EU, it would not be surprising for the EU to propose that the U.S. also adopt net neutrality and broadband pricing restrictions in order to “harmonize” the EU-U.S. communications market as part of the upcoming U.S.-EU Free Trade Agreement.

Given that the D.C. Appeals Court is likely to rule that the FCC does not have the authority to regulate broadband companies and the Internet, net neutrality proponents, led by the Big Internet lobby, may try and convince the Administration to try and use the U.S.-EU Free Trade Agreement as another vehicle to impose net neutrality in the U.S and around the world

[First published by The Precursor Blog]