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Hazlett in Financial Times: The Broadband Numbers Racket

Professor Thomas Hazlett takes issue with recent allegations that the U.S. is falling behind other nations in broadband adoption.

In a Financial Times op-ed, Hazlett takes a look at market data showing that the U.S. ranks first (at 71.1 percent) among the five wealthiest large economies, followed by France, the United Kingdom, Japan, and Germany (using calculations based on broadband subscriptions, population, and household size).

Deregulation, rather than regulation, has been the impetus behind strengthened competion and innovation, says Hazlett. "French and Japanese networks languished early in the WWW era, while unregulated US cable TV operators pioneered innovations in residential broadband," he says. "DSL growth in America then surged when it, too, was deregulated."

"Cherry picking broadband penetration numbers to imply the US is slipping into Third World status is fine for a quickie term paper, at least if Wikipedia goes down," says Hazlett. "But adults ought to sort through the multi-dimensional complexity of the real world—as The Economist attempts to do with its e-Readiness Index which, in 2008, ranked the US as first in the world."

The broadband numbers racket, Financial Times, September 17, 2009. By Thomas Hazlett.

Exerpt:

"Every party – from corporate giants to heads of state – poses as that ER doc. They are ready to inject the elixir; no time for lab tests! The pre-set diagnosis is that our superiors have more ambitiously regulated, forcing networks to help entrants compete. But South Korea, the reigning world heavyweight broadband champ, did not use 'line-sharing' but rival networks to win the crown. Canada, a highly ranked contender, did likewise, sporting cable vs. telephone rivalry similar to our own.

"Meanwhile, countries such as Germany unwisely protected state telecoms monopolies and then over-regulated their private spin-offs. While cable TV networks pass virtually every German home, regulations block efficiencies and kill investment incentives. Cable modem service has been near nil, botching a golden competitive opportunity that South Korea, Canada, and the US enjoy.

"Kevin Werbach, an influential University of Pennsylvania law professor, writes that the key is to 'Compare broadband offerings in places that pushed forward with line-sharing, like France and Japan, with those in the US.' He asserts that eliminating line-sharing for US DSL 'was a terrible loss for competition and innovation'.

"The market data say otherwise."

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