Liberty – Not Chinese Industrial Policy – Drives Innovation in America

by on August 19, 2013 · 7 comments

Last week on The Diane Rehm Show, Susan Crawford, former special assistant to President Obama for science, technology, and innovation policy, claimed that China “makes us look like a backwater when it comes to [broadband] connectivity.” When she was asked how this could be, Ms. Crawford responded:

It happened because of [Chinese industrial] policy. You can call that overregulation. It’s the way we make innovation happen in America.

Ms. Crawford is wrong on the facts and the philosophy.

The Actual Facts

Two months ago, Ms. Crawford’s former employer, the Office of Science and Technology Policy, released a report with these conclusions:

  • “Broadband networks at a baseline speed of >10 megabits per second now reach more than 94% of U.S. homes.”
  • “In 2012, North America’s average mobile data connection speed was 2.6 Mbps, the fastest in the world, nearly twice that available in Western Europe, and over five times the global average.”
  • “Just two of the largest U.S. telecommunications companies account for greater combined stateside investment than the top five oil/gas companies, and nearly four times more than the big three auto companies combined.”
  • “The average connection speed in the United States in the fourth quarter of 2012 was 7.4 Mbps, the eighth fastest among all nations, and the fastest when compared to other countries with either a similar population or land mass.”

In comparison, the same source used in the President’s report indicates that China’s average connection speed in the fourth quarter of 2012 was only 1.8 Mbps – seventy-five percent slower than in the United States.

Although our average connection speeds lag those in South Korea and Japan, the differences in speed are less significant from a consumer perspective (7.4 Mbps is enough to delivery high definition video, 1.8 Mbps is not) and reflect differences in population densities and landmass.

The Winning Philosophy

Ms. Crawford believes government intervention “makes free markets and free speech possible.” The facts recited above and the First Amendment to our Constitution – written when government intervention in mass communications was commonplace – both refute that philosophy. Whatever you call it, this type of government intervention “has a record of failure so blatant that only an intellectual could ignore or evade it.”

In the communications context, that record of failure includes government-sanctioned telephone and cable monopolies that policymakers have spent the last two decades unwinding through market-based policies.

The results of that effort demonstrate that it is liberty – the absence of overregulation – that drives innovation in America. The market-based approach to communications regulation pioneered by the Clinton Administration in the 1990s yielded massive investment in new technologies, competition among communications networks, an explosion in new media, and unprecedented consumer choice. We don’t need government intervention for private sector innovation and investment to continue flourishing – we need continued government restraint.

  • http://www.RoslynLayton.com/ Roslyn Layton

    The U.S. accounts for one quarter of the world’s telecom infrastructure, according to Infonetics, a firm that studies telecom investment globally. No country in the world has leveraged broadband better than the U.S. We can look at the number of the world’s leading internet companies according to Mary Meeker at Kleiner Perkins. The U.S. has 14 of the top companies; China has 3. My brother lives in China, and is lucky that he has any internet connection at all, and when he does, the government blocks YouTube, Facebook, and a number of other websites. So when it comes to broadband, China is the last country the U.S. should want to emulate. Thanks for this post and pointing out the FUD. Crawford is trying to shame the U.S. by pointing to fiber projects in different countries, but these are false comparisons. Read about Japan and South Korea http://commercialobserver.com/2013/08/are-japan-and-korea-really-ahead-of-the-u-s-in-broadband/

  • Fred Campbell

    Thanks for sharing your insight and international perspective Roslyn.

  • TheBrett

    “Broadband networks at a baseline speed of >10 megabits per second now reach more than 94% of U.S. homes.”

    That’s not that impressive, particularly since that broadband is also often prohibitively expensive.

    “In 2012, North America’s average mobile data connection speed
    was 2.6 Mbps, the fastest in the world, nearly twice that available in
    Western Europe, and over five times the global average.”

    That’s mostly irrelevant to the broadband issue. Mobile wireless networks aren’t even close to being a substitute for wired broadband.

    “Just two of the largest U.S. telecommunications companies
    account for greater combined stateside investment than the top five
    oil/gas companies, and nearly four times more than the big three auto
    companies combined.”

    I can believe that, but is that including the wireless network providers such as AT &T and Verizon? As I mentioned above, those wireless networks aren’t substitutes for wired broadband, either in speed, bandwidth, or data in terms of cost.

    “The average connection speed in the United States in the fourth
    quarter of 2012 was 7.4 Mbps, the eighth fastest among all nations, and
    the fastest when compared to other countries with either a similar
    population or land mass.”

    The latter is rather misleading, since most of the other countries comparable to the US in either land mass or population are poor developing countries with much less investment and infrastructure for broadband. The average connection speed is more useful.

  • Charles Jackson

    TheBrett asserted:
    Mobile wireless networks aren’t even close to being a substitute for wired broadband

    I guess it depends on how you use those two services. My cable modem service is down and I’m browsing this site using an LTE hotspot instead. I figure someone else will complain about the cable modem problem—-and it will get fixed without my doing anything. In the meantime, browsing the web seems just the same.

    I seem to recall many people saying something like “Mobile networks aren’t even close to being a substitute for wired telephone service.” You don’t hear that much anymore. Certainly, not from anybody under 30.

    Chuck

  • TheBrett

    If all you do is browse, then perhaps it’s enough. But try watching any decent amount of video, and you’ll burn through the data limits of most plans in no time.

  • http://www.RoslynLayton.com/ Roslyn Layton

    It’s interesting. I, along with 7% of the population of Denmark, am cordless and have no problem.
    It’s interesting that many people in the world only come to the web by
    mobile phone, and they don’t miss what they never had. I was just
    browsing mobile apps to submit taxes and LinkedIn’s mobile apps apply
    for jobs. There’s a business opportunity in making the web mobile, and
    people are getting on the bandwagon. While we’re here chewing the fat,
    the world is moving forward. I just interviewed a company today that is
    remaking their HDTV video service for mobile devices because people are not
    buying enough smart TVs fast enough.

  • http://www.RoslynLayton.com/ Roslyn Layton

    Fascinating revelation from Pew: 95% of young adults go to the internet with a smartphone. Could it be that a whole generation will be mobile only? I am not forcing my choices on others; I just want others to be free to choose.

    http://pewinternet.org/~/media//Files/Reports/2013/PIP_Broadband%202013_082613.pdf

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