Wednesday, March 06, 2013

Europe Lags Behind U.S. in Broadband Speeds and Connectivity

Although some have touted Europe as a broadband leader, Europe generally trails the United States in important measures of broadband performance. The United States has led the world in broadband subscriptions for years, and yet there are some in the U.S. who continue to downplay these broadband achievements as part of an effort to advocate for an increased regulatory role in broadband build-out. As far back as 2007, FSF President Randolph May wrote, in a blog entitled "The 'Talking Broadband Down' Crowd," that those who predictably lament OECD broadband penetration statistics are “getting tiresome." They are getting even more tiresome now in light of evidence of the U.S.’s lead over Europe’s broadband speeds, penetration, and market performance.
The United States generally provides faster broadband than Europe. On average, most Americans have access to broadband speeds of 7.2 Mbps, which ranks the U.S. as the ninth fastest broadband provider in the world according to Akamai’s most recent State of the Internet Report. Last year, average broadband speeds available in the U.S. increased by 20%. In contrast, most major countries and regions in Europe are nowhere to be seen on the top-ten list, with the UK ranking 17th, reporting an average connection speed of 6.3 Mbps, and other major countries lagging even further behind, with Germany and France reporting averages of 5.9 Mbps and 4.8 Mbps respectively.
The United States also far exceeds Europe in overall broadband penetration. The U.S. boasts broadband connections for 95% of Americans.  As reported by the New York Times in December 2012, only 2% of European Union households have access to broadband download speeds of 100 Mbps or greater, while in the United States, at least 50 million homes, or nearly half of all households, are able to connect to networks offering at least 100 Mbps. Additionally, only half of E.U. households have service at even 30 Mbps. The European Commission says it aims to match the 100 Mbps connectivity rates reported by the United States and provide all E.U. households with service at 30 Mbps by 2020.
Due to competition, Americans also have greater choice in access to broadband than European consumers. There are at least two wireline facilities-based providers of broadband in 85% of the U.S. Additionally, the U.S. provides Internet access through DSL, 3G, 4G, cable, cable-fiber hybrid, FiOS, WISPs, and satellite. This multitude of choices enables consumer access to services that meet their particular needs for various features and functions at various price points.
European networks are still not attracting nearly the same levels of investment or profit that U.S. networks do, and the gap continues to widen. The August 2012 706 Report released by the Federal Communications Commission concedes that "[p]rivate industry is continuing to build out broadband and has invested significantly into broadband networks to date." According to figures cited in the 706 Report, between 1996 and 2010 wireline broadband providers invested $41 billion annually in expanding their networks, amounting to more than half-a-trillion dollars in broadband investment over a fifteen-year period. CTIA estimates for years 1996-2010 show that cumulative capital investments for wireless providers totaled more than $277 billion. In 2011-2012 alone, U.S. providers reported making capital investments of more than $25 billion, while wireless providers in 15 European countries (Austria, Belgium, Denmark, Finland, France, Germany, Greece, Italy, Netherlands, Norway, Portugal, Spain, Sweden, Switzerland and the UK) spent $18.6 billion combined. Investment in European broadband networks has been lagging amid economic downturn, overcrowded market conditions, and tough regulations, and analysts urge change to the regulatory or macroeconomic environment in order to improve conditions.
Private sector leaders have recognized the need for regulatory reform in Europe based on U.S. success. Vodafone CEO Vittorio Calao urged European telcos to “look very carefully at the American model and more seriously ask ourselves why there is such a successful model for customers, shareholders and governments that we seem not to be able to replicate.” 
Some European regulators also have recognized the need for regulatory reform if EU countries are to keep pace with the U.S., which has built out vast high-speed networks.  Neelie Kroes, Commissioner for the European Union’s digital agenda, has proposed measures that would lower national barriers to consolidation, perhaps motivated by Hong Kong-based Hutchison Whampoa’s acquisition of Orange Austria from France Telecom, which reduced the number of national network operators in the country from four to three.
Commissioner Kroes has also proposed that the European Commission begin allowing large operators that lease their landline networks to competitors to increase their rental fees. Kroes has tried to manipulate the competitive landscape in Europe before, proposing regulating rents paid to lessors down to bolster smaller competitors, resulting in criticism from those landline owners. Although Kroes plans to announce a set of measures to bar discriminatory behavior by landline operators, it remains to be seen whether this complicated, superimposed regulatory framework will actually preserve and promote competition rather than hinder it. 
Rather than celebrating the good news of remarkable U.S. progress in broadband deployment, which is at least partly attributable to the FCC's deregulatory broadband policies, the "talking broadband down" crowd continues to criticize the current marketplace and downplay positive statistics and reports in order to advance a pro-regulatory agenda.  In contrast to the view promoted in Susan Crawford’s Captive Audience, technological advances and new business models will continue to evolve in ways that provide consumers with a meaningful choice of alternatives that meet consumer demands. This is what we have seen in the context of U.S. broadband development over the past decade.
Although the U.S. has made great strides in broadband deployment and provision of high-speed services, it is essential to continue on the path towards completing the transition to a digital world.  Just as FSF President Randolph May said in 2007, the correct path is not “defining down” the U.S.’s broadband progress in an effort to promote increased regulation. In order to remain a world leader in broadband build-out and speed, the U.S. must continue to support innovation and growth by removing unnecessary regulatory barriers to network development and build-out.