Why Europe is falling behind America on broadband

Scott Cleland Contributor
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The EU continues to fall behind the U.S. on broadband infrastructure modernization because the EU’s broadband-industrial-policy discourages private investment while America’s competition policy encourages private investment.

Given the European financial crisis, the EU just 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.

Unfortunately for Europe, the EU’s broadband industrial policy depends on government funding to succeed.

Even more unfortunate for the EU’s broadband industrial policy has been the investment-depressing impact of the EU’s price regulation decisions. They have artificially driven prices down for both wire line and wireless services below the amount necessary to fund private investment in broadband network modernization to fiber or 4G LTE networks.

For wire line services and broadband, the EU has long embraced the monopoly regulation model, where access competition is manufactured and sustained by government regulation that favors the prices, terms and conditions that are most beneficial for resellers of the monopoly telecom infrastructure.

This generates artificially low prices for consumers in the short term at the expense of the profits necessary to fund regular expensive investment in fiber for the long term.

In stark contrast, America’s competition policy for communications has succeeded in generating $1.2 trillion in private capital investment in broadband infrastructure over the last fifteen years by several broadband facility competitors per US Telecom.

This competition-fueled private sector investment has resulted in broadband availability for 98% of Americans per the FCC, and in 80% of Americans having access to 100+ Mbps broadband speeds, according to the FCC Chairman.

And according to the NTIA, 68.2% of American households have broadband service compared to just 48% of average European households. On top of that, America’s average broadband price is lower than that of any European nation, according to the ITU.

For wireless services and broadband, EU regulators have long forced down wireless roaming rates for consumers below the profit level necessary to fund the long-term capital investment required to deploy 4G LTE wireless broadband networks.

As a result of these artificially-low government-set wireless prices, most European consumers will have to wait until 2014 or 2015 for significant 4G LTE offerings. That lags America by 2-3 years.

In stark contrast, America’s competitive policies have the U.S. leading the world in 4G LTE wireless subscribers having generated half of the world’s 4G LTE subscribers by mid-2012 per Wirelessintelligence.com. In the U.S., six major wireless providers are in the process of deploying 4G LTE wireless broadband networks: Verizon, AT&T, Sprint, T-Mobile, Cricket and MetroPCS.

Competition works in communications.

As the world leader in promoting facilities-based communications competition, America is the only nation in the world with a second ubiquitous national competitive broadband infrastructure – cable. And cable also is the fastest alternative broadband network to telecom in the world by far with potential for 10 Gbps per CableLabs.

On top of that, the U.S. has deployed much more telco fiber to the home than Europe has.

In sum, Europe continues to fall behind America in modern broadband deployment, both wire line and wireless.

The reason is clear. Europe has Government bureaucrats trying to guess the best economic, business, and technological decisions for their population years in advance and without the requisite business expertise to do so. In contrast, America has many companies constantly competing with one another to determine what technology, speed and pricing consumers actually want, need and will pay for.

Competition beats regulation because it is bottom up and not top down; it constantly evolves, adapts and innovates; and it allows consumers, not bureaucrats, to decide what services consumers enjoy.

The facts and results prove that America’s pioneering communications competition experiment launched in 1996, with near unanimous bipartisan political support, has succeeded wildly. Communications competition works! The EU should give it a try.

Scott Cleland is Chairman of NetCompetition a pro-competition e-forum supported by broadband interests and President of Precursor LLC, a research consultancy for Fortune 500 companies.

Tags : broadband eu
Scott Cleland