Foreign Affairs on Broadband

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Much like my reaction to the odd little piece from Lawrence Lessig, I find this article in FA magazine a bit...slippery.

The article strikes me as little more than a long-winded whinge about how the US' broadband network isn't the crown jewel of the world anymore, and it's all the government's fault for not doing enough.

The Japanese government played a critical part in these developments. It made well-considered and timely decisions to allot cost-free spectrum for each new mobile-phone generation. In so doing, it gave up badly needed revenue, but it retained full control over the terms of licensing and the flexibility to reassign spectrum according to future technological developments. In 2007, the government is expected to announce new spectrum allocations for the fourth-generation broadband mobile phones planned for 2010. Meanwhile, to protect consumers, the government has set important conditions before granting a service license, insisting that a carrier's network cover a certain area of the country and guarantee a certain level of service (with minimal dropped calls or interference, for example).

By contrast, U.S. mobile-phone policy was born of a colossal blunder from which the industry has yet to recover fully. In the early 1980s, after the management consultancy McKinsey estimated that there would be little demand for mobile phones and a small prospect of profitability, the FCC carved the United States into 734 tiny mobile-phone districts. It handed out two provider licenses in each district: one automatically went to the regional telephone company, and the other was drawn by lottery. The resulting infrastructure was cripplingly fragmented. It could not support nationwide calls, and inefficiencies and expensive connection rates translated into sky-high charges for customers.

By the use of juxtaposition, the implication is that the higher costs of mobile phone usage in the US is somehow a lack of the government imposing "important conditions". Rather than letting a number of standards compete, it's simply better for the government to subsidize one network language and have everyone's money pay for it, so that those who use it (the early adopters) don't face too high a price for entry. This leaves the government in the position of having to continually monitor the system to see what's necessary for the next generation of phones. The future of companies is tied up intimately with the decisions of the government. Why doesn't this bother people who fear the imposition of biases from massive corporations? NTT DoCoMo has far more money to spend on R&D and lobbying efforts -- is it a surprise that their standard is the one to be picked by the government? Let me propose a straw-man, just for the fun of it: what would be the reaction to the US government suggesting, every time the policy is reviewed, that Verizon just happens to have the best standard, and since it already covers the entire nation as a result of the government deciding that it had the best system last time, to go ahead and subsidize Verizon to roll out the new kind of service?

Why is innovation, and the cost thereof, something to avoid?

My "favorite" part of the entire article:

Sadly, U.S. mobile-phone competition is still based on price and the extent of a company's coverage rather than the kind of advanced data services available in Japan and elsewhere.

Ah, yes. It's just too bad that the US consumer has to make decisions based on such archaic things as prices. Don't we all realize that subsidized cell-phone coverage (as the Japanese government and Euro-nations have done in abundance) would make it possible for us to buy soda with our phones!!! A life steeped in the grand mosiac of simple push-button interactions is being denied us by a government that refuses to get more involved.

In addition, the article uses a metric that I find as problematic here as when it's used to argue for greater government participation in health care: "access". The question, as framed by the FA article, is about how many people could potentially use the network -- not how many people actually do. Greater access is not synonymous with greater use, as any health policy researcher is likely to tell you.

Here's another slipshod bit of reasoning:

In 2001, Robert Crandall, an economist at the Brookings Institution, and Charles Jackson, a telecommunications consultant, estimated that "widespread" adoption of basic broadband in the United States could add $500 billion to the U.S. economy and produce 1.2 million new jobs. But Washington never promoted such a policy. Last year, another Brookings economist, Charles Ferguson, argued that perhaps as much as $1 trillion might be lost over the next decade due to present constraints on broadband development. These losses, moreover, are only the economic costs of the United States' indirection. They do not take into account the work that could have been done through telecommuting, the medical care or interactive long-distance education that might have been provided in remote areas, and unexploited entertainment possibilities.

The economic study isn't the issue -- the expansion of the idea is. "Long distance eduation in remote areas"? Well, noting that Japan is smaller in size than California (roughly 150,000 sq. mi. vs 163,000 sq. mi.), this distance is considerably different when we have to think of vast swaths of the country as "remote". And it is at those places the author simply leaps from access to uptake that are more likely to face larger hurdles: namely the costs of a computer that could take advantage of long-distance learning. Undoubtedly some people would be thrilled to have it, but is the serious suggestion here that the poor, remote areas of Texas, Wyoming, North Dakota, Colorado, Kansas, Mississippi, and the rest simply the cost of a cable modem away from an economic boom? Can you really do manufacturing, farming, or welding through telecommuting? Or could it be, rather, that information-economy based jobs are located in population centers that are already well covered by cell phone and broadband access? And might it be that Japan, with considerably less physical size, has a far larger share of its population engaged in "knowledge" work (finance, consulting, programming, and so on and so forth)? The density of population centers, as well as the incidence of the kinds of users (people simply surfing the net vs. those running small businesses out of their homes) makes a large difference that the FA article seems to simply ignore. For comparison's sake, Tokyo is on par with Poughkeepsie.

As a final note (yes, I know, you're relieved to hear that), I would suggest a refresher course in political economy for Thomas Bleha, as this section is woefully problematic:

By 2010, the [President's Information Technology Advisory Council] should also aim to make available high-speed broadband access to two-thirds of all U.S. households for $30 to $35 per month. The key to reaching this goal is the government's taking the lead in creating a strongly competitive environment for DSL, cable, power line, and newer wireless broadband technologies. The more these technologies compete among themselves, the sooner Americans will have access to faster, cheaper broadband service. And with enough competition, there should be no need for government financial incentives.
[Emphasis mine]

His suggestion seems to be that these incentives would simply...fade away. How often does a privileged group allow the source of its privilege to simply wither away? Because the benefits of the policy accrue to such a small group, and the costs to such a large group (everyone else), we can expect to see whomever it is that has been given a cheap ride to fight for continuing the policy, with little coherent effort against them.

Despite how much it costs the US, and impacts farmers around the world how is Bush doing on simply reducing those farm subsidies?

1 Comment

I am surprised that anyone thinks that Japan is a model cell phone market. Ever try to take your cellphone over there? My phone will work everywhere except Japan and Korea.

The bottom line is that US cellphone users pay the lowest rates in the world. Who cares if we don't have the latest ubergeek features? We probably don't want to pay for them anyway!

As for DSL, I've got it for $20 a month. So, how exactly is the government going to "fix" broadband? What exactly needs to be fixed?

The services are there, if enough people are willing to pay for them. All the industrial policy in the world can't change that, for the simple reason that bureacrats are not smarter than corporate executives.

And for anyone who thinks that Japanese industrial policy works, I have one answer: analog high definition television. Don't go looking on your cable system for it. The Japanese bet heavily on it, and they were burned when technology went digital.

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