Half-right: Europe not far ahead of America, but policy isn’t the explanation

Carrier-funded study finds America ahead in some ways, gets reason wrong. Penn’s Chris Yoo just found America was ahead of Europe in high speed broadband; Harvard’s Yochai Benckler reported to the broadband plan that America was far behind.

    I just took a fresh look at the data and the pattern is clear: Europe is ahead in some things and America in others. I could easily spin the data either way. Presumably the highly directional findings reflects that Chris is generally supportive of American policy and Yochai generally skeptical. Chris deserves credit for openly disclosing his source of funding, the mostly carrier-financed Broadband for America group. 

    From which came my headline,Europe not far ahead of America, As Chris notes, many have claimed the U.S. is far behind. Actually, as I’ve written before, the U.S. is clearly behind the leaders. It’s in the middle of the pack of large nations in most measures.

My opinion is that the U.S. should be close to and comparable to the leading nations in broadband. Reasonable people disagree on the need for government action, believing that getting the government involved will have undesirable side effects. Chris strikes me as an honorable scholar. A while back, I saw some errors in the data he was presenting and pointed him to reliable sources to confirm my claim. In his later publications, he did not repeat those claims.

    Chris unfortunately makes an error drawing policy conclusions from the data. Even if the U.S. were generally ahead, there’s no way to say that’s proof that U.S. policy over the last 10 or 15 years was the cause. I’ve long been convinced that policy has only a minor effect on investment decisions in telecom. Empirically, technology advances and the competitive situation have a far stronger effect on investment; Policy generally mostly affects the level of profits.

   Correlation is suggestive but never proof of causation, as the reporters who blindly picked up Chris should have realized. Post hoc ergo propter hoc (after this therefore because of this) is a classic logical fallacy but in this case it’s not even post hoc. The U.S. advantage in speed was almost inevitable based on networks built before 1998. Chris correctly notes that “America has more high speed broadband.” But when you look at the data this is explained by the fact that America has more cable, about 96% coverage. (Britain is at 50%, France around 35% and Italy close to zero.) Nearly all cable networks have been upgraded to DOCSIS 3.0 at 50-100 megabits because advancing technology made the upgrade so cheap it’s nearly universal. Much DSL is stuck at 3-10 megabits, especially in countries that until recently planned a fiber upgrade. (Germany, France, Italy).

    The higher U.S. cable availability explains most and probably all of the difference Yoo found. The U.S. was around 90% cable coverage back in 1998, which couldn’t have been caused by policy in the last 10-15 years. No matter what U.S. policy was for the last decade, we’d be at ~84% DOCSIS 3 and higher speeds because that’s the natural cable technology. Saul Hansell in the NY Times found one cableco could upgrade to DOCSIS 3.0 for about $20home passed. Almost always, the cost to go from 35 meg to 160 meg was less than $100. Almost all cable lines in the developed world are upgraded.

   Incidentally, the other area U.S. is currently ahead is LTE availability; Europe is often ahead in LTE speed. Again, this is because of technology issues and it would be deceptive to claim it’s due to policy. Verizon jumped into LTE early and hard because their 3G CDMA network didn’t have good 3.5G or 4G. Eliminate the Verizon build and the U.S. and Western Europe are comparable.

    Ex-Senators Harold Ford and John Sununu are the Chairmen of Broadband for America, which funded this work. They should insist he take a closer look. Reporters who echoed the unsupported conclusion should follow up their stories with a more accurate look. 

    Reporters, myself included, are human and need to work hard to overcome the inevitable bias we have. 

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Yoo is correct that America has more connections capable of over 30 and 50 megabits downstream. We also have more LTE at the moment, because Verizon had a technical problem. Their CDMA network had no decent upgrade to 3.5G, So Verizon was the first big carrier to leap into LTE and others had to follow. The U.S. is ahead of countries like Romania and Bulgaria in broadband take rates but well behind much of the affluent parts of Europe. Including the poor nations of Eastern Europe, the U.S. is probably comparable in take rate. The major Europeans are generally ahead in speed on wireless. Deutsche Telekom sells 100 meg LTE while Verizon still advertises 6-12 megabits across most of their network. The Europeans are also rapidly closing the gap in LTE availability.

   Two big differences are probably due to policy. The U.S. has approximately 5 times as many homes that can’t get wireline broadband as the major Europeans. $7B in broadband stimulus was mostly wasted, to Larry Strickling’s discredit. In Europe, the governments make clear to the large carriers that they are required to reach nearly all the country. British Telecom has been delivering broadband to all but 1% of homes for many years. U.S. telcos often bypass 10%, cable 8%.

   Prices for highspeed service are much higher in the U.S., as Yoo acknowledges. With so many different packages and deals, the difference can easily be obscured. I’ve looked in detail and the typical high speed British or French broadband offering is 30-60% cheaper than most American one. In many cases, U.S. carriers are twice as expensive as the incumbents in Europe. That’s almost certainly due to the greater competition in Europe made possible by unbundling.    

The data is so ambiguous that anyone can select points that “prove” almost anything but I believe I’m choosing representative samples.

The discrepancy between the two Professors was first noted by Blair Levin in this thoughtful piece. 

“Step Away from the Mirror” – Remarks by Gig.U Executive Director Blair Levin at the National Press Club

JUNE 4, 2014 – 8:01 PM

Today, at an event hosted by the Penn Wharton Public Policy Initiative, Professor Christopher Yoo presented research on broadband speeds, investment, and pricing in the U.S. versus E.U., challenging the commonly cited narrative that the U.S. is slipping behind compared to other nations. Gig.U Executive Director Blair Levin was invited to speak in response to the findings. You can read his remarks below:

“Step Away from the Mirror”

Remarks by Blair Levin in Response to Christopher Yoo

National Press Club, Washington DC

June 4. 2014

Pop Quiz: Which activity is more productive; looking at oneself in the mirror and asking “do these jeans make me look fat?” or going to the gym?

At this point, you have two thoughts.  First, the latter, duh.  Second, what does that have to do with broadband?

Not much.  But your logic that focusing on actions to improve one’s condition is better than wondering about how one’s condition appears is why I’m not going to address the many questions raised by Professor Yoo’s excellent paper on international broadband comparisons.

It’s not that the paper isn’t interesting, nor is it that the paper isn’t relevant on some level.

But ultimately, it’s a distraction.

Ironically, Professor Yoo’s paper to me is much like another excellent paper from Professor Benkler of the Harvard Berkman Center that also reviewed international comparisons.  Submitted to the National Broadband Plan, it came to the opposite conclusion on almost every issue.

Many criticized us for not citing it more.  The reason we didn’t cite it is the same reason I will largely ignore Professor Yoo’s paper.  The papers both address where we are but they don’t address the more critical question of what do we have to do to get where we want to be.

Consider the long history we have of debating international broadband comparisons.  You can extract two amusing facts.

Fact one:  The data on that topic is consistently changing.  Yet the positions of the parties never change.  Those who said five years ago that we rock still think so; those who argue that we suck still think so.

That kind of thinking, applied to your portfolio, would result in large holdings of Nokia and Blackberry stock.

Fact two: Many of those who say we are doing best are also strongest advocates for a comprehensive rewrite.  This raises an interesting question: If we are doing so well why do we need a rewrite?

I’m not saying there’s not an answer.  I’m just saying, I’d like to know what problem in the real world they are trying to solve.

Now back to the serious point–the problem of all international comparisons.

They are backwards looking.  Where ever we are today, it is a function of decisions made years, if not decades, ago.   Looking at those reveals how rankings don’t provide much insight going forward.

For example, our position today with LTE, in which I think the United States is doing very well, stems from many sources, among them the 1997 decision to free up spectrum by accelerating the DTV transition from 30 years to about a decade and a decision to equalize wireless with wired in terms of terminating access charges.  A debate at that time on our international rankings would have given us no insight as to what the right decision would be on those, as those rankings largely had to do with cell phone standards.

Further, international comparisons, in my experience, are like a watch a runner looks at constantly in a race, distracting us from the right question: If we want to look forward, we should ask, what do we need to be doing today to lead in the future?

My answer: step away from the mirror.  Go to the gym.

In this case the gym are the four strategies embedded in every National Broadband Plan:

  • Build fiber deeper
  • Use spectrum more efficiently
  • Get everyone on broadband; and
  • Use the platform to improve delivery of public goods.

And here’s the bottom line.  Assume those who think we are doing great are right.  What should we do?  Those same four things.

Now assume those who think we are doing horrible are right.  What should we do?  Those same four things.

So the right debate is about how to do those four things.

I could discuss any of the four but as Professor Yoo’s paper is largely about wireline deployments, let’s focus on the fiber question.

When we were doing the Plan, we couldn’t figure out federal policies that would gain approval and drive fiber deeper, but out of those discussions came the Google fiber project and Gig.U.  So is it having an impact?

I am more optimistic than I was a year ago.

A year ago, the Time Warner Cable CEO said no one wants faster speeds.

The company just tripled their speeds with no price increase.  Oh, but guess where? Austin, Texas, where Google, AT&T and a CLEC named Grande are building fiber deeper and have announced plans to offer a Gig at an affordable price.

A year ago, the Cox Cable CEO said the company can’t upgrade to provide a gig; it would cost “billions.”

Cox just announced it is upgrading to a gig in its entire region.  Oh, but guess where it is starting?  In areas where Google or CenturyLink have announced projects offering an affordable gig.

AT&T is talking to a hundred communities about an upgrade.  They correctly credit Google Fiber, which is discussing fiber networks with 34 communities, for sparking competition and changes in the attitudes of cities about how cities can help lower the cost of deployment.  I give them credit for seeing the opportunity in the change; indeed, the Gig.U group of six communities in North Carolina reached a deal with AT&T that provides an interesting model for other regions to consider.

I was in Illinois last week helping announce another gig project in Champaign and Urbana, the towns that surround the University.  I could point to a number of other efforts in places you haven’t heard about, all of which have been triggered by the idea of driving fiber deeper.

This leads to a small point, a big point, and a meta point.

The small point is the current debate over where we are does not include any of the news I just mentioned.  So I think, wherever we are, we may be a lot better in a couple years.  But I could also envision news that would cause us to be worse.

As Tom Wheeler told the cable show, put away your party hats.  We have not passed an inflection point at which the next American wireline upgrade is soon and irreversible.  But unlike a year ago, there are positive signs on a visible horizon.

The big point is that none of those advancements were assisted by the debate over where we are; they resulted from a conversation about how we can do better.  Yes, sometimes at the many city meetings I have been at in the last three years, there are discussions about Seoul or Stockholm.  And I suppose John Oliver epic net neutrality rant last Sunday mentioning that the US ranks the mid-20’s in broadband speeds, behind Estonia, might inspire some others to act.  Oliver apparently succeeded in crashing the FCC website; that is ironic on so many levels.

But the reason why cities are leading this upgrade cycle is because their leaders are focusing on the right question of how to make progress.  Unlike the person looking at the mirror and asking how they look, these leaders tell their cities, let’s get to the gym.

The meta point is we have a choice.  We can focus on the easy or focus on the important.  Measurement is easy; constant improvement is hard.

The International Chapter in the National Broadband Plan did not focus on measurement; it focused on process, on those countries that understand that progress is not created by a press release.  It is a function of ideas, tests, and course correction.

As we approached the first year anniversary of the Plan’s release, I asked for the FCC to do an annual review of the broadband plan, not for the sake of bragging about what we got right but for the sake of determining what we got wrong.  I was told by the then Chairman’s PR guy that this was a bad idea as it would give space for folks to criticize the Plan.  I said that would happen anyway.  I thought it was better to create a forum for smart, actionable criticism.

Obviously, that Chairman’s PR guy was much more persuasive with that Chairman than I; such a review never occurred.  Much more could be said about that but suffice it to say here, I think the FCC’s broadband policies would be better if there was a sense of the long-term, a willingness to engage in a debate on how best to implement the four strategies, and a commitment to course correction.

That debate is harder but as the cities are showing us, it does have benefit of leading to an era of bandwidth abundance, which, rather than a static relative measurement with Estonia, ought to be the north star of our policy.

Thank you.

 

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