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Europe's Internet Handcuffs Show U.S. How Not to Regulate | Commentary

These investments in Internet infrastructure are critically important to the economy as a whole. By encouraging broadband providers to invest more than $1.2 trillion since 1996, the U.S. has grown its labor productivity, a key economic indicator that measures efficiency in producing goods and services. Had the U.S. followed the EUís slower investment pace in information technology since the late 1990s, U.S. labor productivity would have been 25 percent to 30 percent lower than it is today.

Today, the U.S. leads the world in wired and wireless Internet subscribers, which have access to low prices, superior quality and unparalleled choice across different communications technologies. On the contrary, the relative slowing of European broadband performance has led to some soul-searching. The EUís top broadband policymaker has indicated a forthcoming reduction of the scope for regulation in key areas.

Yet, ironically, some U.S. policy pundits are unquestioningly advocating the benefits of broadband regulation, while in Europe there is increasing awareness of the serious drawbacks from interventionist regulation ó especially the downside to investment. For instance, this is the reason the European Commission is recently considering reworking its telecom reform plans in the area of wholesale access to mobile networks.

Clearly, the cautious U.S. decision to refrain from applying EU-style unbundling on providers has spurred competition and investment in the American broadband market, thus enabling huge advances in Internet technology. Reversing that decision would risk hindering further advancements in all services using broadband infrastructure.

Heading down a path of EU-style, interventionist broadband regulation could severely harm U.S. investments in necessary communications infrastructure, darkening U.S. competitiveness globally. It goes without saying that this path could reverse the momentum of the U.S. broadband market and worsen U.S. economic conditions overall.

If anything, the European telecom investment doldrums should clearly signal to Congress and FCC chairman nominee Wheeler that any country with an established infrastructure-based competition model would take a considerable risk if it jettisoned that model in favor of interventionist broadband regulation.

Martin H. Thelle is a partner and Bruno Basalisco an economist at Copenhagen Economics. They co-authored the new report ďEurope Can Catch Up With the US: A Contrast of Two Contrary Broadband Models

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