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America's Place In The Broadband World
by Drew Clark
When technology and telecommunications officials look at the U.S. experience with high-speed Internet access, the glass is either half-empty or half-full.
America lags many other industrialized nations in broadband access, recently falling from 11th to 13th in an International Telecommunication Union (ITU) ranking of citizens who subscribed to high-speed Internet access as of December 2003. Broadband experts said the United States is likely to score even lower in future rankings, particularly given surges in penetration this year by France and Germany, neither of which made the last ITU top 15.
When Bush administration officials talk about broadband, however, they accentuate positive signs. A September report on broadband by the FCC highlighted the fact that the number of broadband subscribers grew from 5.9 million in June 2001 to 20.3 million in December 2003. A report released Thursday by the National Telecommunications and Information Administration, using Census Bureau data, found similar signs of growth. It also noted a huge disparity between the 24.7 percent of rural homes and 40.4 percent of urban households that subscribe to broadband.
Learning From The Best?
The United States trails on average download speeds and price of service, especially in head-to-head match-ups with the world's broadband champions: South Korea, Japan and Canada.
Japan ranked 8th on the ITU list, and the country's KDDI telecom company offers Internet connections of 47 megabits per second (mbps) for only $26 a month. In South Korea, the world's broadband leader, the telecom company Hanaro sells 20 mbps for $48 a month. Canada Bell and the U.S. cable giant Comcast each retail Internet access at 3 mpbs, but what costs $34 U.S. dollars north of the border goes for $53 in this country. Canada ranks third in the world on broadband, after South Korea and Hong Kong.
Technology industry leaders are heartened that President Bush began talking up broadband on the campaign trail in March 2004, saying that all Americans should have universal and affordable broadband by 2007. They desperately want to preserve the momentum but are worried that America lacks a national policy and that its international competitiveness is being jeopardized.
That has opened a lively debate about what, if anything, America can learn from studying the broadband experience of the leaders, particularly South Korea, Canada and Japan. The lessons differ, but one commonality in each of the three nations is that the government officially adopted an aggressive pro-broadband policy.
"We are thrilled with the goal of universal access by 2007," says Jason Leuck, director of international affairs and global policy for the Telecommunications Industry Association. "The question we have is, how do we get from here to there? With the U.S., you don't see as clear a policy as you do in Canada," to say nothing of South Korea and Japan.
Leuck said each of those nations has detailed policies to drive broadband to the home.
South Korea: Leader Of The Broadband Pack
South Korea's government was the first to attempt a major jumpstart to its telecom infrastructure, which it saw as a way out of the collapse of the Asian financial markets in 1997. The government invested $24 billion building a fiber-optic backbone that reached municipal governments and other neighborhood public facilities.
Korea Telecom, the state-owned company that was eventually privatized in 2002, built the network but had to lay two strands of fiber, allowing competitors to access the second.
In the United States, cable modems over coaxial wires are the dominant means to access broadband, by a margin of 56 percent to 42 percent for digital subscriber lines (DSL) over copper lines. That is not the case globally, where DSL dominates cable 59 percent to 39 percent.
DSL particularly thrives when fiber links with copper lines in neighborhoods, or at the entryway to large apartment complexes, because the copper wires are used only for the last 1,000 feet in the home, at speeds that top 20 mbps over what are called VDSL lines, or very high-speed DSL. Those enable consumers to get a wide range of Internet applications, including digital television.
Laying the second fiber strand in South Korea, in some cases all the way to large complexes, allowed competitors like Hanaro to compete vigorously with dominant Korea Telecom. "Hanaro can offer services, and they don't even need the local loop" used by KT, said Taylor Reynolds, a communications analyst at the Organization for Economic Cooperation and Development who has studied broadband internationally.
The question of sharing telecommunications wires between companies, a subject of bitter controversy in the United States, did not even arise.
Sharing The Line In Japan
As South Korea's broadband plans took root, Japan began to warily eye the emerging dominance of its traditional Asian rival. "We learned quite a lot from the Korean experience," said Yasu Taniwaki, economic counselor and telecom attache of the Japanese embassy in Washington.
Japan privatized its government-run phone company NTT in 1985 and in 2000 required the company to interconnect with its rivals. With 98 percent of all homes served by NTT lines, Japan pushed an aggressive approach requiring the "unbundling" of access to those local loops.
Urged on in the policy by Yahoo Broadband, the Japanese subsidiary of the U.S.-based Internet company, the country has seen both the fastest speeds and the lowest prices per data bit in the world. "Unbundling didn't work as well in Korea as in Japan [because] Japan really pushed NTT to open" its lines, including new fiber-optic cables, to competitors like Yahoo, said Robert Shaw, an Internet strategy and policy adviser for ITU.
NTT was slow to deploy DSL technology, both because of heavy investment in ISDN, a previous digital phone technology, and because it was deploying fiber cables to homes.
"NTT's plan was to get people on ISDN while they rolled out the fiber" with even faster speeds, Reynolds said. "But when Yahoo Broadband comes on, and South Korea takes off with broadband penetration, Japan realized they needed to go the DSL route, even though they thought they could skip it."
The resulting vigorous competition over the same fast fiber backbone has pushed both lower prices and higher speeds.
Northern Fiber
Broadband penetration does not just soar in densely populated nations, however, and Canada's recent success proves it.
As in the United States, the country had a strong cable industry, and "the market was positioned as a duopoly between cable and telecom as early as 2000," said Francois Menard, a Canadian telecom expert who helps municipalities build fiber-optic networks. "The cable companies invested massively and forced the telephone companies to invest massively in DSL."
But unlike in the United States, he said, Canada's broadband policy encouraged municipal governments and public institutions, including school boards, to build high-speed, fiber-optic infrastructure. "That is not happening in the U.S., where the e-rate program is preventing U.S. schools and libraries [from] owning their own fiber networks," Menard said.
In Canada, he said, the result has been the construction of more dark fiber in the country -- including rural regions -- than anywhere else in the world, and that leads to the rise of "customer-owned and customer-empowered networks that is hitting like a Quebec storm."
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