Don’t reclassify ISPs as phone companies.
News consumers everywhere — readers of newspapers and websites, viewers of television news, and even HBO subscribers — are well aware that American policymakers and regulators are currently grappling with issues like net neutrality and the broader regulatory landscape for communications technology. But for those actually making the decisions — chiefly members of Congress and the Federal Communications Commission – much can be learned from the experience of countries that have mistakenly exercised greater government control over the Internet.
Take China, which since 2008 has been the country with the largest number of Internet users. While the Chinese Internet has grown quickly, it could have grown much more quickly if it had not been hampered by heavy regulation.
In addition to strict controls on Internet content, the Chinese maintain strict regulation of communications companies and prohibit companies from engaging in business practices that would take advantage of the convergence of media, IT, and communications that benefits consumers in the rest of the world. For example, telecommunications enterprises are prohibited from engaging in radio and broadcasting operations (including wireline and wireless), while broadcasting companies are prohibited from engaging in telecommunications activities.
China is an extreme example, but it is not difficult to imagine that the United States could go in a similar direction if U.S. officials open the door to interventionist Internet regulation. By asking the government to reclassify Internet service providers as telephone companies, under the guise of allegedly ensuring a free and open Internet, some Americans may unwittingly be on the road to ceding power to forces that can use the Internet against them, as is seen in China every day.
Similarly, the European framework of regulations that treat broadband as a public utility also presents dangers to avoid. The European system is built on service-based competition, whereby a new entrant into the service market leases access from established providers at wholesale costs — known as unbundling. As a result, there is little incentive for market entrants to invest in their own new networks or move beyond the limit of the infrastructure that has already been created; the Internet infrastructure has therefore remained stagnant.
A recent analysis by Professor Christopher Yoo at the University of Pennsylvania clearly demonstrates that Europe’s imposing of stifling telephone-era regulations on broadband networks hinders deployment and raises prices.
Specifically, the study found that the European model does little to encourage investment in new communications networks. Broadband investment per household in the U.S. was over twice that of Europe — $562 per household compared to $244 per household in 2012. Furthermore, the study found that the U.S. led Europe in the deployment of important high-speed services, such as LTE wireless networks and fiber. LTE coverage was 86 percent in the U.S. compared to 27 percent in Europe, while fiber coverage in the U.S. was nearly double that of Europe. And perhaps more important for consumers, basic broadband was less expensive in the U.S. than in Europe.
These latest data, which join an enormous body of resounding evidence, show that the careful regulatory approach of the U.S. has been very effective at spurring convergence and competition among disparate communication, content, and service providers, with tremendous benefits delivered to consumers. What’s more, robust competition has fueled continuous investment in new networks and technologies.
As American officials consider updates to the Telecommunications Act of 1996 or changes to the breadth of regulations applied to broadband networks, they should not minimize the importance of restricting government interference in the Internet. The approach of light regulation on the Internet that policymakers have taken to date has served the U.S. well, allowing more than 98 percent of the country to have access to high-speed wired and wireless service. Congress and the FCC should guard against giving federal agencies any power to over-regulate the Internet.
— Gianluigi Negro is a Ph.D. candidate at the Università della Svizzera italiana in Lugano, Switzerland. He is also the assistant editor at the university’s China Media Observatory.