EU ahead of US on policy

Lobbying makes all the difference in the world.

The No. 1 question I get from readers is, “Why is broadband roll-out so slow?” Readers know how important this issue is. I’m not exaggerating when I say that slow telecom investment is bringing the tech economy down. Without ubiquitous access, sites have to skimp on multimedia, which slows demand for the Web and all the software that entails. (It also reduces sites’ advertising options.) Without media-rich Web sites, we have less demand for the faster computers such sites will crave. Also, the primary growth companies that existed when the economy was going good — small businesses — simply cannot compete without faster broadband adoption. That’s not to mention the fact that the whole telecom equipment sector is in a depression because the telcos in this country aren’t buying.

As I will explain in my September Insights column, broadband investment in this country has seriously lagged behind that of our Asian and European counterparts. In Asia, this is primarily because of state-sponsored investment. In Europe, the free market has spurred broadband growth. Because I don’t advocate corporate welfare, I will focus on the lessons we can learn from Europe with the hope that our own free market in telecom will eventually start to grow again. If policy makers in Washington started following the European Union’s (EU’s) lead and stopped catering to telecom lobbies, the tech economy might start to grow again.

Before we talk about the EU’s policies, there is one essential difference between the two markets that affects the eventual policies. European telecom companies–such as British Telecom (BT)–have strong competition such as Cable and Wireless (C&W). In this country, the local loop is dominated by monopolies that only reluctantly comply with laws that are supposed to guarantee competition. Competitors are so weak that they don’t affect the Regional Bell Operating Companies (RBOCs, or Baby Bells) much. If Baby Bells don’t invest in new equipment, they’ll still outperform their nearest competitors on revenue by a factor of 100 or so. I will address how we can instill real competition in telecom in more detail in that September column, but suffice to say we need to find a way to allow the Baby Bells to compete against each other for the local loop. Strong competition would spur growth in this country as it has in Europe, where 80 percent DSL adoption is common, according to my sources. In this country, we would be lucky to achieve 30 percent adoption.

As for policies, the EU is not subject to the kind of dealmaking we see on Capitol Hill. Few lobbies are as strong as the telecom lobby, and it shows in proposed laws such as the Tauzin/Dingell bill, which will diminish competition if it is passed by the Senate later this summer. U.S. RBOCs claim that they will invest in the new opportunities created by the bill. I’m not so sure, however. They have not invested in existing opportunities because they have not been pressed by competition to do so. Why they will invest with diminished competition is beyond me. I suspect the real reason they wanted this law is to remove the threat of fines for anticompetitive behavior. Court records show they have paid billions of dollars in such fines since 1996, when the present law was passed. Despite their records, U.S. lawmakers appear satisfied by the performance of the RBOCs, and are willing to strengthen the monopolies as a reward to the Baby Bells.

Despite the fact that there is much stronger competition in Europe than in the United States, however, the EU is not satisfied. As we reported on our site last Wednesday, the EU intends to take strong action against BT and similar companies because they are not doing enough to allow C&W and similar companies to compete on their shared networks. The story from Europe sounds all too familiar: Incumbent local exchange carriers (ILECs) are making it hard on competitive local exchange carriers (CLECs) to install broadband equipment on ILEC premises. Reading the story, you would think the situation in Europe is desperate. If our lawmakers had such resolve, our much more desperate situation would get the attention it deserves. They should be punishing U.S. ILECs for making it difficult for CLECs to install broadband, as court record repeatedly prove. If it passes, Tauzin/Dingell will do just the opposite.

James Mathewson is editor of ComputerUser magazine and ComputerUser.com.

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