We're Number 13!

Most Americans blithely assume that they live in the country that's the world leader in information technologies. Ours is, after all, home to the most recognizable high-tech corporate brands and the land where the Internet's fundamental architecture was first worked out. As a CIA assessment puts it, we enjoy “the largest and most technologically powerful economy in the world.” Whatever dissatisfactions one might have with one's Internet access are assumed to be fundamentally technological or scientific in nature -- better products haven't yet been invented, or if they have been invented, the cost of deploying them is prohibitive.

But it isn't true. The United States ranked as just the fourth “most wired” country on the planet as recently as four years ago, according to the International Telecommunication Union, a multinational organization that tracks technology and communications developments. And our standing is slipping fast -- down to 13th today, with no sign of recovery. In part, the issue is geographical, as it's hard to wire America's relatively spread-out population. But this issue is hardly unique to broadband. The more densely packed people are, the higher the return to any given square mile of power line, telephone cable, cable-TV wire, or, for that matter, highways and railroads. But we're not lagging in those categories.

The Internet is another story. My cable modem, capable of downloading “up to” (but rarely, if ever, in practice) 6 megabits per second (Mbps), is just about the fastest service available to U.S. consumers on the home market. It costs $67.95 per month as a stand-alone (less when packaged with digital cable). More typical is Comcast's standard Washington, D.C., package, offering 4 Mbps for $57.95 per month. Even that is unusually good by American standards -- the typical U.S. broadband service is just 1.5 Mbps.

In contrast, look at Japan. Consumers there could buy direct subscriber line (DSL) Internet connections (the broadband service sold by phone companies in America) with 8 Mbps download speeds for $20 to $40 -- back in late 2001. Today, standard packages operate in the 12 to 40 Mbps range. Better product for a lower price, naturally enough, turns out to be an excellent method of achieving the ostensible goal of American policy: getting people to sign up. By 2003, 15 million Japanese had broadband connections, compared with 30 million Americans (in a country whose population is 2.3 times larger and significantly younger). And Japan is ostensibly in the middle of an extremely prolonged economic slump.

In South Korea, well over 20 percent of the population has broadband service, more than twice the U.S. figure. These connections typically operate at around 10 Mbps, and a collaborative project by businesses and the Korean government is prepared to start rolling out ultrafast fiber-to-the-home connections offering speeds of 50 to 100 Mbps (Japan currently leads in this field).

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What's the secret? It turns out to be nothing more than those countries' decisions to adopt a successful policy of encouraging competition through open access to infrastructure -- at roughly the same moment that the United States began to abandon it. Even under the best of circumstances, the U.S. market is controlled by a cozy duopoly of a cable company and a local telephone company. Without competitive pressure, these firms have little incentive to offer lower prices or deploy superior technologies (even though they already exist). Indeed, one of the main things you can do with fast broadband connections is use them to get reliable phone, video, or videoconferencing services, thus giving the cable and telephone industries direct incentives to avoid rolling out new products that would compete with the ones they're already selling.

The problem, then, is political -- poor competition policy. As far back as 1994, the members of Congress most responsible for the relevant elements of the 1996 Telecommunications Act were drafting legislative language citing a desire “to make available … a switched, broadband telecommunications network capable of enabling users to originate and receive affordable high quality voice, data, graphics, and video telecommunications services.” Broadband Internet did, in fact, exist in the early 1990s; the only problem was that, as with today's Japanese-style high-speed connections, nobody could buy it because the phone companies lacked competitive pressure to deploy. The solution was to empower the Federal Communications Commission (FCC) to force local phone companies to provide competitors access to elements of their networks, creating a real market in phone services. The incumbent companies didn't like the idea at the time, but they swallowed the pill in exchange for gaining permission to enter the long-distance phone market, which, at the time, they called “the big enchilada.”

The policy worked. So-called competitive local exchange carriers (CLECs) appeared on the marketplace, consumers had choices, and -- like magic -- DSL was suddenly available to consumers.

Then came George W. Bush. Powered by anti-regulation ideology (and no doubt boosted by as much as $11 million in phone-utility contributions to Republican candidates), his FCC under Michael Powell began dismantling the competition rules, allowing local phone companies (now merged and bigger than ever) to reassert their monopolies. Plans announced early this year for MCI and AT&T to be acquired by former Baby Bells are, as Gene Kim-Melman, director of Consumer Union's Washington office, put it, “the final nails in the coffin of the local competition experiment Congress launched in the 1996 act.”

Unfortunately, the most obvious solution -- bringing back the old rules -- won't work. “We're beyond the point of going back and revisiting the local competition rules,” says Kenneth DeGraff, an analyst at Consumer's Union. Construction of new phone lines under the current rules makes such policies hard to reimplement, and with AT&T and MCI out of business, there's not enough lobbying weight on the pro-competition side to make going back to the old rules politically feasible. Some CLECs, searching for a new business model, are banking on offering telephone service over the Internet (known as Voice over Internet Protocol, or VoIP), but for reliable VoIP service to work you need good broadband, and getting good broadband requires competition.

In theory, this should matter less than it used to, because barriers between different sorts of telecommunications are breaking down. As the phone companies' “astroturf” front group, The Future … Faster! puts it, “Cable, wireless, wireline, satellite and Internet companies all are competing for your business, bringing more choices and newer technologies to all of America.”

This is the new competition strategy espoused by the Bush administration -- it doesn't matter if phone companies face competition because the concept of a phone company is outdated. Instead, competition will take place across platforms, with everyone offering all different kinds of services. But the cable-phone duopoly, as we've seen, isn't good enough, largely because broadband eliminates distinctions among different types of telecommunications firms and thus threatens hard-earned (or at least lobbied-for) monopolies. What's more, there's simply no such thing as an “Internet company” in the relevant sense; indeed, that's the point of the multiplatform argument. “Wireline,” meanwhile, is a fancy way of saying “local phone company.”

Satellite is, in some ways, promising, especially for rural customers, as it avoids the expense of stretching wires across uninhabited tracts of land. But the technology suffers intrinsic limitations that render it unlikely to make it a robust option as a broadband provider. Dishes don't function in many houses that lack clear lines of sight to satellites. What's more, satellite transmission is highly asymmetrical; much more data can be transferred to the user's computer than can be transmitted from it, limiting its usefulness for many emerging technologies. Barring the development of some new platform (Internet over power lines is the most discussed candidate), then, competition will come from wireless companies or it will come from nowhere.

But there's a problem: The nation's two largest wireless providers -- Verizon and Cingular -- are owned by the very incumbent phone companies -- Verizon, SBC, and BellSouth -- they'll ostensibly be competing with. The Clinton administration, again, tried to take action to ensure a competitive wireless phone market. In this case, the key step was structuring auctions of the radio spectrum in such a way as to cap the amount of it that any one firm could control. This drives down the market price of the spectrum and, in effect, amounts to a onetime subsidy to smaller wireless companies. The Bush FCC, driven by free-market principles -- and a taste for budget gimmicks that allow one-off revenue gains through things like spectrum auctions to offset permanent tax cuts -- has reversed course here as well, adopting a pro-consolidation policy.

On this front, there's still time to switch course. At some point in the not-too-distant future (2007, according to current law, but it's likely to be delayed), television broadcasters are supposed to stop transmitting non–high-definition television (HDTV) signals over the air and give the relevant block of the frequency spectrum back to the government, which will then auction it. Democratic Representative Ed Markey has proposed structuring these auctions to favor smaller, independent companies and reserving a portion of the spectrum for “unlicensed” use, including the construction of public-sector wireless broadband networks by local governments frustrated with the slow pace of private-sector broadband deployment.

“We need to make sure that Verizon Wireless and Cingular can't get to them,” says DeGraff, who would also favor preventing Sprint/Nextel -- which is large, though not owned by a local telephone monopolist -- from bidding for the spectrum.

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Barring some kind of public mobilization, however, the prospects for such a change in approach seem bleak. What's more, it's not clear when, if ever, substantial auctions of the right kind of spectrum will happen in the further future. If John Kerry had won the last election, there's a good chance we would be looking at a different situation. Counting on some future Democratic administration to set things right, however, may prove to be a case of waiting until it's too late. Conventional wisdom, moreover, has it that there are no votes in technology policy, only campaign contributions, so it's a waste of time to raise a public fuss. Nor is this a topic that's of particular interest to any of the major liberal constituency groups, making it unlikely that Democrats will feel compelled to speak up in a major way about it.

There's some reason to think, however, that it could be a promising issue. First of all, nearly 30 million wired Americans love their high-speed access and would really love someone who promised to make it several times faster. On top of that, there's cash to be raised from the pro-competition interests in the debate, both from smaller providers and from the various companies that could expect higher sales in a more wired America.

The Democratic Party has been paralyzed for years now in a debate over the merits of “populism,” torn between an impulse toward strident denunciations of corporate power and a fear that such a message is out of step with the fundamental optimism of the American people (and therefore the need of an opposition party to project a hopeful vision of the future and not just a litany of complaints).

Broadband policy, while distinctly not a first-order public concern, does offer an appealing way of squaring this particular circle. Structurally, it fits perfectly into the populist frame, offering a tale of a monopolist stranglehold over consumers and policy-makers alike. At the same time, it's a fundamentally hopeful story, centered less on problems in the present than on the exciting future we could enjoy under a better set of policies. Most clearly, it's a brand of populism that could appeal to the demographic a recent Pew Research Center survey identified as “Upbeats” -- relatively prosperous and well-educated voters who combine “highly favorable views of government with equally positive views of business and the marketplace.”

This bloc lacks commitment to the Republican Party, but voted heavily for Bush in 2004 despite some doubts about his foreign policy and considerable skepticism about the merits of the social-conservative agenda. Reaching out to this group does seem, as the anti-populists would have it, to be a worthwhile approach, but it would need to be done in a way that wouldn't involve further eroding the Democrats' appeal to working-class voters, who are considerably more skeptical about corporate power.

Most of all, getting broadband right is part of a politically and substantively compelling response to growing public anxieties about global economic integration that doesn't involve unrealistic promises to flip a switch and turn the global economy off. As Bush himself put it in his one speech on the subject, “On a per-capita basis, America ranks 10th amongst the industrialized world” in the number of broadband connections, and, “We don't like to be ranked 10th in anything.” Technological improvements abroad are not, as such, a threat to American prosperity, but few people will -- or should -- be satisfied with a set of policies that condemn us to fall further and further behind the cutting edge.

Matthew Yglesias is a Prospect staff writer.

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