Articles by Roslyn Layton

Roslyn LaytonRoslyn Layton, PhD Fellow, is an American who studies internet economics at the Center for Communication, Media, and Information Technologies at Aalborg University in Copenhagen, Denmark. Her program is a partnership between the Danish Department of Research & Innovation; Aalborg University, and Strand Consult, a Danish company. Prior to academe, Roslyn worked in the IT industry in the US, India, and Europe. www.RoslynLayton.com


This blog was made in cooperation with Michael James Horney, George Mason University master’s student, based upon our upcoming paper on broadband innovation, investment and competition.

Ezra Klein’s interview with Susan Crawford paints a glowing picture of  publicly provided broadband, particularly fiber to the home (FTTH), but the interview missed a number of important points.

The international broadband comparisons provided were selective and unstandardized.  The US is much bigger and more expensive to cover than many small, highly populated countries. South Korea is the size of Minnesota but has 9 times the population. Essentially the same amount of network can be deployed and used by 9 times as many people. This makes the business case for fiber more cost effective.  However South Korea has limited economic growth to show for its fiber investment. A recent Korean government report complained of “jobless growth”.  The country still earns the bulk of its revenue from the industries from the pre-broadband days.

It is more realistic and correct to compare the US to the European Union, which has a comparable population and geographic areas.  Data from America’s National Broadband Map and the EU Digital Agenda Scoreboard show that  the US exceeds the EU on many important broadband measures, including the deployment of fiber to the home (FTTH), which is twice the rate of EU.  Considering where fiber networks are available in the EU, the overall adoption rate is just 2%.  The EU government itself, as part of its Digital Single Market initiative, has recognized that its approach to broadband has not worked and is now looking to the American model.

The assertion that Americans are “stuck” with cable as the only provider of broadband is false.  It is more correct to say that Europeans are “stuck” with DSL, as 74% of all EU broadband connections are delivered on copper networks. Indeed broadband and cable together account for 70% of America’s broadband connections, with the growing 30% comprising FTTH, wireless, and other  broadband solutions.  In fact, the US buys and lays more fiber than all of the EU combined.

The reality is that Europeans are “stuck” with a tortured regulatory approach to broadband, which disincentivizes investment in next generation networks. As data from Infonetics show, a decade ago the EU accounted for one-third of the world’s investment in broadband; that amount has plummeted to less than one-fifth today. Meanwhile American broadband providers invest at twice the rate of European and account for a quarter of the world’s outlay in communication networks. Americans are just 4% of the world’s population, but enjoy one quarter of its broadband investment.

The following chart illustrates the intermodal competition between different types of broadband networks (cable, fiber, DSL, mobile, satellite, wifi) in the US and EU.

US (%)

EU (%)

Availability of broadband with a download speed of 100 Mbps or higher

57*

30

Availability of cable broadband

88

42

Availability of LTE

94**

26

Availability of FTTH

25

12

Percent of population that subscribes to broadband by DSL

34

74

Percent of households that subscribe to broadband by cable

36***

17

 

The interview offered some cherry picked examples, particularly Stockholm as the FTTH utopia. The story behind this city is more complex and costly than presented.  Some $800 million has been invested in FTTH in Stockholm to date with an additional $38 million each year.  Subscribers purchase the fiber broadband with a combination of monthly access fees and increases to municipal fees assessed on homes and apartments. Acreo, a state-owned consulting company charged with assessing Sweden’s fiber project concludes that the FTTH project shows at best a ”weak but statistically significant correlation between fiber and employment” and that ”it is difficult to estimate the value of FTTH for end users in dollars and some of the effects may show up later.”

Next door Denmark took a different approach.  In 2005, 14 utility companies in Denmark invested $2 billion in FTTH.  With advanced cable and fiber networks, 70% of Denmark’s households and businesses has access to ultra-fast broadband, but less than 1 percent subscribe to the 100 mbps service.  The utility companies have just 250,000 broadband customers combined, and most customers subscribe to the tiers below 100 mbps because it satisfies their needs and budget. Indeed 80% of the broadband subscriptions in Denmark are below 30 mbps.  About 20 percent of homes and businesses subscribe to 30 mbps, but more than two-thirds subscribe to 10 mbps.

Meanwhile, LTE mobile networks have been rolled out, and already 7 percent (350,000) of Danes use 3G/4G as their primary broadband connection, surpassing FTTH customers by 100,000.  This is particularly important because in many sectors of the Danish economy, including banking, health, and government, users can only access services only digitally. Services are fully functional on mobile devices and their associated speeds.  The interview claims that wireless will never be a substitute for fiber, but millions of people around the world are proving that wrong every day.

The price comparisons provided between the US and selected European countries also leave out compulsory media license fees (to cover state broadcasting) and taxes that can add some $80 per month to the cost of every broadband subscription. When these real fees are added up, the real price of broadband is not so cheap in Sweden and other European countries.  Indeed, the US frequently comes out less expensive.

The US broadband approach has a number of advantages.  Private providers bear the risks, not taxpayers. Consumers dictate the broadband they want, not the government.  Also prices are scalable and transparent. The price reflects the real cost. Furthermore, as the OECD and the ITU have recognized, the entry level costs for broadband in the US are some of the lowest in the world. The ITU recommends that people pay no more than 5% of their income for broadband; most developed countries fall within 2-3% for the highest tier of broadband, including the US.  It is only fair to pay more more for better quality. If your needs are just email and web browsing, then basic broadband will do. But if you wants high definition Netflix, you should pay more.  There is no reason why your neighbor should subsidize your entertainment choices.

The interview asserted that government investment in FTTH is needed to increase competitiveness, but there was no evidence given.  It’s not just a broadband network that creates economic growth. Broadband is just one input in a complex economic equation.  To put things into perspective, consider that the US has transformed its economy through broadband in the last two decades.   Just the internet portion alone of America’s economy is larger than the entire GDP of Sweden.

The assertion that the US is #26 in broadband speed is simply wrong. This is an outdated statistic from 2009 used in Crawford’s book. The Akamai report references is released quarterly, so there should have been no reason not to include a more recent figure in time for publication in December 2012. Today the US ranks #8 in the world for the same measure. Clearly the US is not falling behind if its ranking on average measured speed steadily increased from #26 to #8. In any case, according to Akamai, many US cities and states have some of the fastest download speeds in the world and would rank in the top ten in the world.

There is no doubt that fiber is an important technology and the foundation of all modern broadband networks, but the economic question is to what extent should fiber be brought to every household, given the cost of deployment (many thousands of dollars per household), the low level of adoption (it is difficult to get a critical mass of a community to subscribe given diverse needs), and that other broadband technologies continue to improve speed and price.

The interview didn’t mention the many failed federal and municipal broadband projects.  Chattanooga is just one example of a federally funded fiber projects costing hundreds of millions of dollars with too few users  A number of municipal projects that have failed to meet expectations include Chicago, Burlington, VT; Monticello, MN; Oregon’s MINET, and Utah’s UTOPIA.

Before deploying costly FTTH networks, the feasibility to improve existing DSL and cable networks as well as to deploy wireless broadband markets should be considered. As case in point is Canada.  The OECD reports that both Canada and South Korea have essentially the same advertised speeds, 68.33 and 66.83 Mbps respectively.  Canada’s fixed broadband subscriptions are shared almost equally between DSL and cable, with very little FTTH.   This shows that fast speeds are possible on different kinds of networks.

The future demands a multitude of broadband technologies. There is no one technology that is right for everyone. Consumers should have the ability to choose based upon their needs and budget, not be saddled with yet more taxes from misguided politicians and policymakers.

Consider that mobile broadband is growing at four times the rate of fixed broadband according to the OECD, and there are some 300 million mobile broadband subscriptions in the US, three times as many fixed broadband subscriptions.  In Africa mobile broadband is growing at 50 times the rate of fixed broadband.  Many Americans have selected mobile as their only broadband connection and love its speed and flexibility. Vectoring on copper wires enables speeds of 100 mbps. Cable DOCSIS3 enables speeds of 300 mbps, and cable companies are deploying neighborhood wifi solutions.  With all the innovation and competition, it is mindless to create a new government monopoly.  We should let the golden age of broadband flourish.


Source for US and EU Broadband Comparisons: US data from National Broadband Map, “Access to Broadband Technology by Speed,” Broadband Statistics Report, July 2013, http://www.broadbandmap.gov/download/Technology%20by%20Speed.pdf and http://www.broadbandmap.gov/summarize/nationwide. EU data from European Commission, “Chapter 2: Broadband Markets,” Digital Agenda Scoreboard 2013 (working document, December 6, 2013), http://ec.europa.eu/digital-agenda/sites/digital-agenda/files/DAE%20SCOREBOARD%202013%20-%202-BROADBAND%20MARKETS%20_0.pdf.

*The National Cable Telecommunications Association suggests speeds of 100 Mbps are available to 85% of Americans.  See “America’s Internet Leadership,” 2013, www.ncta.com/positions/americas-internet-leadership.

**Verizon’s most recent report notes that it reaches 97 percent of America’s population with 4G/LTE networks. See Verizon, News Center: LTE Information Center, “Overview,” www.verizonwireless.com/news/LTE/Overview.html.

***This figure is based on 49,310,131 cable subscribers at the end of 2013, noted by Leichtman Research http://www.leichtmanresearch.com/press/031714release.html compared to 138,505,691 households noted by the National Broadband Map.

Answer: To check health information. Seniors who can investigate a symptom online will save a trip to the hospital. Not knowing whether a symptom is serious and not having the ability to investigate the condition online, many seniors without internet access go to emergency room to answer their health related questions.

This is the fourth post in a series about broadband. It investigates criticisms about America’s broadband market by Susan Crawford. Other posts are available here and here.

Crawford notes on a recent blog post, “One recent 2012 study showed that even after going through digital literacy training, 22% of participants still did not have a connection.”  The part that Crawford doesn’t mention is that 78% of the 33,000 people who participated in the digital literacy program (30 hours of classroom instruction on the basics of the computers and internet) went on to become sustainable broadband adopters (SBAs), meaning they secured their own broadband connection at home. Continue reading →

This is the third of a series of three blog posts about broadband in America in response to Susan Crawford’s book Captive Audience and her recent blog post responding to positive assessments of America’s broadband marketplace in the New York Times. Read the first and second blog.

If Crawford’s mind, this is a battle between the oppressor and the oppressed:  Big cable and big mobile vs. consumers. Consumers can’t switch from cable because there are no adequate substitutes. Worst of all, she claims, the poor are hardest hit because they have “only” the choice of mobile.

Before we go deeper into these arguments, we should take a look back.  It was not long ago that we didn’t have broadband or mobile phones.  In less than two decades, our society and economy have been transformed by the internet, and we have evolved so quickly that we can now discuss which kind of network we should have, how fast it is, which kind of device to use, and even how the traffic should be managed on that network. The fact that we have this discussion shows the enormous progress we’ve made in a short time. Plus we can discuss it on a blogging platform, yet another innovation enabled the internet. Continue reading →

This is the second of a series of three blog posts about broadband in America in response to Susan Crawford’s book Captive Audience and her recent blog post responding to positive assessments of America’s broadband marketplace in the New York Times. Read the first post here. This post addresses Crawford’s claim that every American needs fiber, regardless of the cost and that government should manage the rollout.

It is important to point out that fiber is extant in almost all broadband technologies and has been for years.  Not only are backbones built with fiber, but there is fiber to the mobile base station and fiber in cable and DSL networks.  In fact American carriers are already some of world’s biggest buyers of fiber.  They made the largest heretofore purchase in 2011, some 18 million miles of fiber optic cable.  In the last few years American firms bought more fiber optic cable than all of Europe combined.[1]

The debate is about a broadband technology called fiber to the home (FTTH).  The question is whether and how to pay for fiber from the existing infrastructure—from  the curb into the house itself as it were.  Typically the it’s the last part of the journey that can be expensive given the need to secure rights of way, eminent domain, labor cost, trenching, indoor wiring and repair costs.  Subscribers should have a say in whether the cost and disruption are warranted by the price and performance.  There is also a question of whether the technology is so essential and proven that the government should pay for it outright, or mandate that carriers provide it.

Fiber in the corporate setting is a different discussion. Many companies use private, fiber networks.  The fact of that a company or large office building offers a concentration of many subscribers paying higher fees has helped fiber grow in as the enterprise broadband choice for many companies.  Households don’t have the same economics.

There is no doubt that FTTH is a cool technology, but the love of a particular technology should not blind one to look at the economics.  After some brief background, this blog post will investigate fiber from three perspectives (1) the bandwidth requirements of web applications (2) cost of deployment and (3) substitutes and alternatives. Finally it discusses the notion of fiber as future proof.

Broadband Subscriptions in the OCED

By way of background, the OECD Broadband Portal[2] report from December 2012 notes that the US has 90 million fixed  (wired) connections, more than a quarter of the total (327 million) for 34 nations in the study.  On the mobile side, Americans have three times as many mobile broadband subscriptions as fixed.  The 280 million mobile broadband subscriptions held by Americans account for 35% of the total 780 million mobile subscriptions in the OECD. These are smartphones and devices which Americans use to the connect to the internet.

Continue reading →

I am American earning an industrial PhD in internet economics in Denmark, one of the countries that law professor Susan Crawford praises in her book Captive Audience: The Telecom Industry and Monopoly Power in the New Gilded Age. The crise du jour in America today is broadband, and Susan Crawford is echoed by journalists David Carr, John Judis and Eduardo Porter and publications such as the New York Times, New Republic, Wired, Bloomberg News, and Huffington Post. One can also read David Cay Johnston’s The Fine Print:  How Big Companies Use ‘Plain English’ to Rob You Blind.

It has become fashionable to write that American broadband internet is slow and expensive and that cable and telecom companies are holding back the future—even though the data shows otherwise.  We can count on the ”America is falling behind” genre of business literature to keep us in a state of alert while it ensures a steady stream of book sales and traffic to news websites.

After six months of pro-Crawford coverage, the New York Times finally published two op-eds[1] which offered a counter view to the “America is falling behind in broadband” mantra. Crawford complained about this in Salon.com and posted a 23 page blog on the Roosevelt Institute website to present “the facts”, but she didn’t mention that the New York Times printed two of her op-eds and featured her in two interviews for promotion of her book.   I read Crawford’s book closely as well as her long blog post, including the the references she provides.  I address Crawford’s charges as questions in four blogs.

  1. Do Europeans and East Asians have better and cheaper broadband than Americans?
  2. Is fiber to the home the network of the future (FTTH), or are there competing technologies?
  3. Is there really a cable/mobile duopoly in broadband?
  4.  What is the #1 reason why older Americans use the internet?

For additional critique of the America is falling behind broadband myth, see my 10 Myths and Realities of Broadband.   See also the response of one of the op-ed authors whom Crawford criticizes.

 

How the broadband myth got started

Crawford’s book quotes a statistic from Akamai in 2009. That year was the nadir of the average measured connection speed for the US, placing it at #22 and falling. Certainly presenting the number at its worse point strengthens Crawford’s case for slow speeds. However, Akamai’s State of the Internet Report is released quarterly, so there should have been no problem for Crawford to include a more recent figure in time for her book’s publication in December 2012. Presently the US ranks #9 for the same measure. Clearly the US is not falling behind if its ranking on average measured speed steadily increased from 22nd to 9th.

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