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Monday, January 28, 2008

Getting Broadband Backwards
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Following similar mistakes by high-profile commentators, Robert Mitchell's got the broadband Internet story utterly backwards.

"Deregulation of telecommunications has been nothing less than an unmitigated disaster for U.S. businesses," Mitchell writes. He notes, correctly, that broadband around the world is flourishing.

Truly high-speed Internet services of 100Mbit/sec. to 1Gbit/sec. are opening up new business opportunities that could create the next Google.

But not in the U.S. Here, the Internet is being throttled at its endpoints by telecommunications carriers and cable companies with a record of spotty service quality, a broadband rollout that has left more than half the nation behind, and overpriced, overprovisioned “high-speed” broadband services that are still widely unavailable.

But wait. Broadband access wasn't deregulated in 1996, as Mitchell contends. We didn't get real deregulation until 2005. And this merciful relief is just now bearing fruit.

The 1996 Telecom Act relaxed rules on long-haul communications and long-distance voice service but re-regulated most last-mile services and broadband technologies. The result was a dramatic expansion of inter-city national and international capacity but a relative slowdown in broadband access investment. Thus the misallocation of capital that led to the "fiber glut," where pathetically thin last-mile tributaries -- artificially constrained by stifling regulation -- could not generate enough data to fill the newly deregulated, capacious core of the network.

But that was the story five to seven years ago, when the lack of last-mile broadband crashed the telecom and technology sectors. In many ways the ten years following the 1996 Act was a wasted decade. Today just the opposite is true. Freed from the old restrictions, broadband buildouts in the U.S. are booming.

Long overdue decisions by the FCC and the courts in 2003, 2005, and 2006 relaxed or eliminated most last-mile broadband regulation. Some work remains at the state utility commission level. But today Verizon is in the midst of a $23 billion investment in new fiber-to-the-home links. AT&T is spending billions more to build fiber-to-the-neighborhood and FTTH for new houses. These networks, which are coming on line right now and will continue to spread to tens of millions of American homes over the next few years, will offer broadband services between 10 and 50 megabits per second. Exactly Mitchell's wish.

The cable companies -- whose broadband services have always been mostly unregulated and who thus gained the broadband lead versus telecom -- will now have to respond in kind. As Verizon and AT&T leapfrog cable's broadband speeds of around 6 megabits-per-second, cable will have to transition more and more of its already capacious networks from TV programming to broadband service. Already we are seeing cable systems offer 15 or even 30 megabit services. Within a year or two, many millions of Americans will have access to broadband every bit as good as world leaders Korea or Hong Kong.

We are -- right now -- in the midst of the broadband buildout we've all been waiting for. The prescriptions advocated by Robert Mitchell would not lead to more broadband but could bring the new broadband buildout to a screeching halt.

posted by Bret Swanson @ 12:36 PM | Broadband

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Of course if we had a way to measure the penetration of broadband deployment over time we could settle these questions rather easily.

Perhaps something similar to the bills introduced in Congress last year that would inventory the broadband penetration across the US.

Posted by: Wyatt Ditzler at January 31, 2008 2:39 PM

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