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Broadband lessons from Europe [Commentary]

As the Federal Communications Commission considers whether to regulate the Internet as a public utility, it should look to the real-world experiences of other countries that have followed that course.

Consider Europe, which has long subjected the Internet to the regulatory regime applicable to the telephone system, just as proposed in the U.S. If promoting investment in high-speed service is the goal, the results in Europe have been far from encouraging.

Parallel studies conducted by the European Commission and the U.S. government show that the U.S. focus on private investment and competition has placed it far ahead of Europe in terms of Internet speed and access. By the end of 2012, 82 percent of U.S. households had access to Next Generation Networks (providing 25 megabits per second), compared with only 54 percent of European households. On this measure, the U.S. enjoyed an advantage of more than 50 percent.

The European approach has also adversely affected the digital divide. In rural areas, 48 percent of U.S. households have access to these newer networks. Only 12 percent do in Europe, trailing the U.S. by a factor of four.

The U.S. beats Europe on investment as well. The U.S. invested $565 per household to support broadband. At $244 per household, Europe invests less than half as much.

Even with respect to pricing, where Europe is sometimes claimed to hold a decisive advantage, the picture is not quite so clear. A contemporaneous study indicates that U.S. broadband was cheaper for all speed tiers below 12 megabits and is comparably priced at speeds between 12 and 30 megabits, which makes it easier for low-income families to become broadband users. U.S. broadband costs are higher for services above 30 megabits, but that cost differential is justified by the fact that average U.S. households consume more than 50 percent more bandwidth than their European counterparts.

These disparities result in no small part from the two different approaches to regulation. The European model heavily restricts the ways that Internet infrastructure is used, resulting in a system that disincentivizes private investment in broadband technology. The United States, by contrast, has generally left the building and upkeep of Internet infrastructure to private companies and relied on their competitive interests to promote investments in network upgrades.

The problems with the European model have already begun setting off alarm bells across the continent. The EU's Commissioner for the Digital Agenda, Neelie Kroes, has warned that that "Europe is falling behind" the U.S. and Asia and has suggested reducing the regulatory burden on Next Generation Networks. And Vodafone CEO Vittorio Colao said last year, "The European industry should 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?'"

Those worries turned out to be justified. According to its own internal assessments, the EU will fall $150 billion to $230 billion short of its broadband goals.

If the FCC were to impose European-style regulation, these studies indicate that the investments that have enabled such a healthy and vibrant U.S. broadband infrastructure may wane. Such an outcome would burden Americans by raising costs, limiting choice and slowing innovation.

Moreover, subjecting the Internet to a regime that was created 80 years ago for a different economic and technological time seems anachronistic. Simply put, public utility regulation was not designed for a convergent world in which the same connection can provide voice and video as well as new applications that were inconceivable at that time, such as social networking, mobile maps and cloud computing.

The way to move broadband forward is not through regulation but rather through more investment and competition. It is vital that the FCC consider the European experience in its deliberations on the future of broadband and adopt regulations that do not repeat others' mistakes.

Christopher S. Yoo is the John H. Chestnut Professor of Law, Communication and Computer & Information Science at the University of Pennsylvania, who recently authored a new report, "U.S. vs. European Broadband Deployment: What Do the Data Say?" His email is csyoo@law.upenn.edu.

To respond to this commentary, send an email to talkback@baltimoresun.com. Please include your name and contact information.

Copyright © 2015, The Baltimore Sun
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