Broadband a Foreign Affair?

Pardon the pun above, but there are a couple of engaging articles in Foreign Affairs regarding US broadband policy or the lack thereof.

Thomas Bleha argues that the US should be emulating the successes of Japan and other Asian nations. His argument is one of government leadership and investment.

In turn, Professor Philip Weiser responds that our current problems are the result of obsolete laws passed by Congress, and that our current deregulatory track is the right one. His argument is one of government providing frameworks and removing barriers, but not making direct economic choices.

(Thanks to Progress and Freedom Foundation for bringing these to my attention.)

It is true that Japan and South Korea have done very well in deploying broadband, and very fast broadband, to their citizens. But because they exceed the US in this regard, does this imply that we should emulate them? I think there are two glaring omissions from most analyses on this topic.

1) As with all things, one must first look at the economics. What is the salient metric here? I argue, population density.

According to The Economist Pocket World in Figures here on my desk, the population density of Japan is 337 people per square kilometer. South Korea, 477 souls in the same space. The United States, 31.

At a minimum, these countries are 10 times as dense as the US. Running a mile of fiber will pass 10 times as many people in Japan as it will in the US.

If the costs of providing fiber to an individual are linear, it means that fiber deployments in these countries cost 10% of what they do in the States. Let’s assume that the process has enough overhead to make this only half true. In that case, they cost 20% of the comparable deployment.

That’s a pretty cost-effective equation for broadband providers -- imagine the return. Should we be surprised that they are deploying a lot of bandwidth at those prices?

If you are in the fiber (or cable) business and can tell me what the real numbers are, please do so or hit my Comments below.

2) The other, more philosophical point, is the will of the people. Here’s the thing about a free(-ish) market like ours in the US: the state of affairs reflects the will of the people.

We all drool about the prospect of fiber speeds to the home. Imagine the possibilities! Video, HDTV, Internet, voice. All great stuff. But who exactly is demanding it?

We might have to warm up to the idea that the broadband market in the US has and will develop according to the will of the people. Is it a tragedy that we don’t yet have fiber to the home? The people say no.

This gets to Prof Weiser’s point above. He argues, rightly, that the type and quality and price of broadband (and any technology) will be determined by the buyers. If the demand is there (which means paying consumers), then there are many players who will rush to fill the demand.

The best thing that government can do is to provide a framework, without advocacy. This means, removing itself from the equation so that the incentives of the producers match the demands of the consumer.

The clearest place for govt policy is in opening spectrum. This means, freeing that market to allow spectrum to be bought and sold, and moving as much of it into this free market as possible.

Prof Weiser makes the point that under the current regime spectrum is not allocated according to demand, but to supporting the shrinking audience for broadcast television. In a freely-traded market, the allocation would quickly trend to the demands of the citizens.

What do you think? Got some figures for me?