New OECD report shows limitations of US broadband public policy]

["David Farber" <dave () farber net>]

---------------------------- Original Message ----------------------------
Subject: New OECD report shows limitations of US broadband public policy
From:    "Robert J. Berger" <rberger () ibd com>
Date:    Mon, July 16, 2007 4:58 pm
To:      "Dewayne Hendricks" <dewayne () warpspeed com>
         "David Farber" <dave () farber net>
--------------------------------------------------------------------------


New OECD report shows limitations of US broadband public policy
By Eric Bangeman | Published: July 15, 2007 - 10:28PM CT

http://arstechnica.com/news.ars/post/20070715-new-oecd-report-shows-
limitations-of-us-broadband-public-policy.html

The Organization for Economic Co-operation and Development has just
released a 319-page report titled "OECD Communications Outlook
2007" (PDF http://www.oecdbookshop.org/oecd/get-it.asp?
REF=9307021E.PDF&TYPE=browse). As you may have guessed by the title
and the size, it's a comprehensive look at the state of the
telecommunications industry around the world. Of particular interest
is the section on broadband deployment, which tracks usage,
deployment, and pricing trends over the past couple of years.
Overall, broadband has become faster and cheaper, especially in
countries where there are a large number of cable and DSL providers.

Pricing
DSL prices fell on average by 19 percent from September 2005 to
October 2006, while comparable speeds jumped by 29 percent. Cable
broadband also got cheaper, dropping 16 percent in price while
getting 27 percent faster.

The OECD ranked countries both on affordability of broadband packages
and price per megabit. Somewhat surprisingly, the US is at the cheap
end of the spectrum when it comes to the range of prices, coming in
at number four behind Sweden, Denmark, and Switzerland. As of October
2006, the cost per month of broadband service in the US ranged from
$15.93 at the low end to $191.20 at the opposite extreme. Swedish
broadband ranged from $10.79 to $46.74, Denmark from $11.11 to
$105.10, and Switzerland's from $12.53 to $55.65. If AT&T's hard-to-
find $10-per-month DSL were considered, the standing of the US would
surely improve.

Keep in mind that in the US, that $15.93 is likely to buy you a
768Kbps/128Kbps DSL connection, while the $19.87 per month minimum in
Japan will result in much faster service.

On the other hand, when the metric switched to cost per megabit per
second, the US did not fare so well, slipping to 12th out of the 30
countries ranked. In the best-case scenario, broadband in the US cost
$3.18/Mbps but could be as expensive as $20.74/Mbps. As one might
expect, given their high speeds and low broadband costs, Japan and
Korea were at the top of the list. Japanese broadband is as cheap as
$0.22/Mbps, while Korea is $0.42/Mbps. Sweden performed very well in
the cost per megabit category too, with prices as low as $0.35/Mbps.

Competition is key
The OECD notes that the broadband situation is better in areas with
multiple broadband options. "Price decreases and improved services
have been the most marked in markets characterized by intense
competition," says the report. "Competition may be the product of
regulatory intervention, as in the case of local loop unbundling, or
may be the result of new infrastructure-based competition."

The countries with the lowest cost per megabit per second are
generally characterized by two things: a significant fiber
infrastructure and a healthy amount of competition. In Japan and
Korea, for instance, fiber is widespread, resulting in the fastest
residential broadband speeds available anywhere. In Europe, the
regulatory environment allows consumers in many countries to choose
from any number of DSL and cable providers. When Nobel Intent
correspondent Chris Lee moved into his flat in the Netherlands, he
had no less than three cable and three DSL providers competing for
his business, including one company—KPN—that offered both. France is
another country with abundant broadband competition—and it has the
fifth-cheapest broadband in the world in terms of price per Mbps.

In contrast, the Federal Communications Commission's policy of
deregulation (http://arstechnica.com/news.ars/post/
20050804-5168.html) has left most consumers faced with duopolies (at
best) and de facto monopolies (I live over 20,000 feet from the
nearest DSLAM in Chicago, so DSL isn't an option for me). The
situation is such that the nation as a whole is a broadband laggard,
according to one FCC commissioner (http://arstechnica.com/news.ars/
post/20061109-8185.html). As a result of the FCC's policies,
competition based on price and speed is spotty at best, and fiber
deployments are in their early stages.

The FCC's vision of competition entails different broadband modes
(e.g., cable versus DSL) rather than different providers offering the
same type of service, which is why there have been rumblings about an
"open access" requirement for the upcoming 700MHz auction. The FCC is
on the wrong track, according to the OECD's reasoning. "Regulatory
decisions across most OECD countries to allow the fixed PSTN's
incumbents local loop to be unbundled has been a major factor in the
development of OECD communications markets and stimulating the
development and competitive provision of broadband offers," explains
the report.

<snip>


––––––––––––––––––––––––––––––
Robert J. Berger - Internet Bandwidth Development, LLC.
Voice: 408-882-4755 eFax: +1-408-490-2868
http://www.ibd.com





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