Broadband Baloney (Opinion) FCC Commissioner Robert McDowell 

Broadband Baloney 

The Wall Street Journal

American consumers are poised to reap a windfall of benefits from a new wave of 
broadband deployment. But you would never know it by the rhetoric of those who 
would have us believe that the nation is falling behind, indeed in free fall. 

Looming over the horizon are heavy-handed government mandates setting arbitrary 
standards, speeds and build-out requirements that could favor some technologies 
over others, raise prices and degrade service. This would be a mistaken road to 
take -- although it would hardly be the first time in history that alarmists 
have ignored cold, hard facts in pursuit of bad policy. 

Exhibit A for the alarmists are statistics from the Organization for Economic 
Cooperation and Development. The OECD says the U.S. has dropped from 12th in 
the world in broadband subscribers per 100 residents to 15th. 

The OECD's methodology is seriously flawed, however. According to an analysis 
by the Phoenix Center, if all OECD countries including the U.S. enjoyed 100% 
broadband penetration -- with all homes and businesses being connected -- our 
rank would fall to 20th. The U.S. would be deemed a relative failure because 
the OECD methodology measures broadband connections per capita, putting 
countries with larger household sizes at a statistical disadvantage. 

The OECD also overlooks that the U.S. is the largest broadband market in the 
world, with over 65 million subscribers -- more than twice the number of 
America's closest competitor. We got there because of our superior household 
adoption rates. According to several recent surveys, the average percentage of 
U.S. households taking broadband is about 42%; the EU average is 23%. 

Furthermore, the OECD does not weigh a country's geographic size relative to 
its population density, which matters because more consumers may live farther 
from the pipes. Only one country above the U.S. on the OECD list (Canada) 
stretches from one end of a continent to another like we do. Only one country 
above us on this list is at least 75% rural, like the U.S. In fact, 13 of the 
14 countries that the OECD ranks higher are significantly smaller than the U.S. 

And if we compare many of our states individually with some countries that are 
allegedly beating us in the broadband race, we are actually winning. 
Forty-three American states have a higher household broadband adoption rate 
than all but five EU countries. Even large rural western states such as 
Montana, Wyoming, Colorado and both Dakotas exhibit much stronger household 
broadband adoption rates than France or Britain. Even if we use the OECD's 
flawed methodology, New Jersey has a higher penetration rate than fourth-ranked 
Korea. Alaska is more broadband-saturated than France. 

The OECD conclusions really unravel when we look at wireless services, 
especially Wi-Fi. One-third of the world's Wi-Fi hot spots are in the U.S., but 
Wi-Fi is not included in the OECD study unless it is used in a so-called "fixed 
wireless" setting. I can't recall ever seeing any fixed wireless users cemented 
into a coffee shop, airport or college campus. Most American Wi-Fi users do so 
with personal portable devices. It is difficult to determine how many wireless 
broadband users are online at any given moment, since they may not qualify as 
"subscribers" to anyone's service. 

In short, the OECD data do not include all of the ways Americans can make 
high-speed connections to the Internet, therefore omitting millions of American 
broadband users. Europe, with its more regulatory approach, may actually end up 
being the laggard because of latent weaknesses in its broadband market. It 
lacks adequate competition among alternative broadband platforms to spur the 
faster speeds that consumers and an ever-expanding Internet will require. 

Europe also suffers from a dearth of robust competition from cable modem and 
fiber. Cable penetration is only about 21% of households. In the U.S., cable is 
available to 94% of all households. Also, the U.S. is home to the world's 
fastest fiber-to-home market, with a 99% annual growth rate in subscribers 
compared with a relatively anemic 13% growth rate in Europe. 

In fact, the European Competitive Telecommunications Association reported last 
fall that Europe is experiencing a significant slowdown in the annual growth 
rate of broadband subscriptions, falling to 14% from 23% annual growth. Growth 
stalled in a number of countries, including Denmark and Belgium (4% in each 
country). And France -- a relative star -- exhibited just 10% growth. Yet all 
of these nations are "ahead" of us on the much-talked-about OECD chart. 

Here in the U.S., the country that is allegedly "falling behind," broadband 
adoption is accelerating. Government studies confirm that America's broadband 
growth rate has jumped from 32% per year to 52%. With new numbers expected 
shortly, we anticipate a continued positive trend. Criticisms of our definition 
of "broadband" being too lax are already irrelevant as over 50 million 
subscribers are in the 1.5 to 3.0 megabits-per-second "fast lane." 

Our flexible and deregulatory broadband policies provide opportunities for 
American entrepreneurs to construct new delivery platforms enabling them to 
pull ahead of our international competitors. For instance, newly auctioned 
spectrum for advanced wireless services will spark unparalleled growth and 

Soon, we will auction even more spectrum in the broadcast TV bands to spur more 
broadband competition. In addition, we are in the midst of testing powerful new 
technologies to use in spectrum located in the "white spaces" between broadcast 
TV channels. 

This is all wonderful news for our future. In a competitive market, consumer 
demand compels businesses to innovate. History has proven that, just when we 
think we are going to "run out" of spectrum, some brilliant entrepreneur finds 
a way to use the airwaves more efficiently. 

By some estimates, since Marconi's first radio transmission 110 years ago 
spectrum capacity has doubled every two and a half years, while the cost of 
delivering information over wireless platforms has dropped by half every 42 

When the Internet was just used for email and static websites, dial-up services 
satisfied consumer demand. But when Napster came along, we saw a huge spike in 
cable modem and DSL take-up rates -- necessary tools in the art of stealing 
music. (Please obtain your music legally!) 

Today, video applications are tugging hard on America's broadband 
infrastructure. YouTube alone uses as much bandwidth today as the entire 
Internet did in 2000. Not surprisingly, our broadband adoption rate continues 
to increase concurrently with the proliferation of this latest "killer app." 

Consumers don't buy fat pipes for their own sake; they buy applications and 
content that require fat pipes. As consumer demand for more bandwidth-intensive 
applications and content increases, so does the incentive for network owners to 
provide more bandwidth. While America is on the right track, we can and will do 
more. We are creating more competition through the construction of new delivery 
platforms. We are clearing away unnecessary regulatory underbrush that may 
inhibit investment needed to fund more competition. We are also creating an 
atmosphere of regulatory certainty and parity. 

When it comes to broadband policy, let's put aside flawed studies and rankings, 
and reject the road of regulatory stagnation. In the next few years, we will 
witness a tremendous explosion of entrepreneurial brilliance in the broadband 
market, if the government doesn't micromanage. Belief in entrepreneurs and a 
light regulatory touch is the right broadband policy for America. 


Mr. McDowell is a commissioner on the Federal Communications Commission. 

License this article from Dow Jones Reprint Service


Mike Hammett
Intelligent Computing Solutions

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