Europe doesn’t seem a very productive test-bed for policy these days. Most economists blame the deficit-cutting “austerity” policies for slowing the economic recovery there. Now, as Congress considers the first major update to the Communications Act in nearly two decades, Europe’s leading regulators are criticizing their own past policies for deploying high-speed Internet — even as some here at home argue that the United States should copy it.
Europe and the United States have two very different strategies for deploying broadband Internet. For the most part, Europe’s system compels taxpayers to heavily subsidize state-controlled telephone companies, which are then required to lease their pipes to Internet service providers at discounted rates. The United States uses a facilities-based competition model envisioned by Congress in 1996, under which ISPs own the broadband pipes and have to invest in and upgrade them to compete for customers in a market that is the most competitive in the world.
The jury is largely in on these competing approaches. Americans generally have faster connections and more broadband choices. Eighty-five percent of American homes sit atop a broadband infrastructure capable of 100 megabits per second, whereas only 50 percent of Europeans have access to networks capable of a more laggard 30 Mbps. Top residential broadband speeds in the United States have increased 19-fold in the past six years. And the United States is in the top 10 nations in percentage of broadband subscriptions of 10 Mbps or higher.
America’s facilities-based approach has brought about more competition than in Europe and elsewhere. The United States and South Korea are the only two countries with three fully deployed broadband technologies: cable (with speeds of 50 to 100 Mbps virtually everywhere and 300 Mbps or better in some areas), telephone (with networks reaching more than 50 Mbps in many places) and 4G LTE mobile service (which delivers speeds as high as 20 Mbps to more than 95 percent of U.S. households, versus only 26.2 percent of European ones).
America’s facilities-based approach has also helped contain prices. The International Telecommunications Union, measuring entry-level broadband pricing, finds the United States is second-lowest behind Israel. The price of the most popular tier of service, when measured on a per Mbps basis, fell by more than 80 percent over the last decade.
A big reason for our success is that this model gives ISPs considerable incentives to invest. ISPs invested more than $1.2 trillion since President Bill Clinton and a bipartisan Congress shepherded the 1996 Telecommunications Act into law. The White House reports that ISPs invested more in 2011 than either Big Oil or the Big Three automakers. The leased network model in Europe has left people there stuck with older DSL networks rather than the newer, faster fiber-optics systems. Operators don’t see the value in risky network overhauls when they are forced to share improvements with their competitors at cut-rate prices.
Nevertheless, some U.S. critics have called for common carrier regulations that could result in a European-style leased-access regime, or in much more stringent network neutrality regulations than Obama’s Federal Communications Commission pushed for that could limit promising joint ventures with video providers and other Internet services.