Son’s Criticism of U.S. Broadband Misleading and Misplaced

Chairman and CEO Masayoshi Son of SoftBank again criticized U.S. broadband (see this and this) at last week’s Code Conference.

The U.S. created the Internet, but its speeds rank 15th out of 16 major countries, ahead of only the Philippines.  Mexico is No. 17, by the way.

It turns out that Son couldn’t have been referring to the broadband service he receives from Comcast, since the survey data he was citing—as he has in the past—appears to be from OpenSignal and was gleaned from a subset of the six million users of the OpenSignal app who had 4G LTE wireless access in the second half of 2013.

Oh, and Son neglected to mention that immediately ahead of the U.S. in the OpenSignal survey is Japan.

Son, who is also the chairman of Sprint, has a legitimate grievance with overzealous U.S. antitrust enforcers.  But he should be aware that for many years the proponents of network neutrality regulation have cited international rankings in support of their contention that the U.S. broadband market is under-regulated.

It is a well-established fact that measuring broadband speeds and prices from one country to the next is difficult as a result of “significant gaps and variations in data collection methodologies,” and that “numerous market, regulatory, and geographic factors determine penetration rates, prices, and speeds.”  See, e.g., the  Federal Communications Commission’s most recent International Broadband Data Report.  In the case of wireless services, as one example, the availability of sufficient airwaves can have a huge impact on speeds and prices.  Airwaves are assigned by the FCC.

There are some bright spots in the broadband comparisons published by a number of organizations.

For example,  U.S. consumers pay the third lowest average price for entry-level fixed broadband of 161 countries surveyed by ITU (the International Telecommunications Union).

And as David Balto notes over at Huffington Post, Akamai reports that the average connection speeds in Japan and the U.S. aren’t very far apart—12.8 megabits per second in Japan versus 10 Mbps in the U.S.

Actual speeds experienced by broadband users reflect the service tiers consumers choose to purchase, and not everyone elects to pay for the highest available speed. It’s unfair to blame service providers for that.

A more relevant metric for judging service providers is investment.  ITU reports that the U.S. leads every other nation in telecommunications investment by far.  U.S. service providers invested more than $70 billion in 2010 versus less than $17 billion in Japan.  On a per capita basis, telecom investment in the U.S. is almost twice that of Japan.

In Europe, per capita investment in telecommunications infrastructure is less than half what it is in the U.S., according to Martin Thelle and Bruno Basalisco.

Incidentally, the European Commission has concluded,

Networks are too slow, unreliable and insecure for most Europeans; Telecoms companies often have huge debts, making it hard to invest in improvements. We need to turn the sector around so that it enables more productivity, jobs and growth.

It should be noted that for the past decade or so Europe has been pursuing the same regulatory strategy that net neutrality boosters are advocating for the U.S.  Thelle and Basalisco observe that,

The problem with the European unbundling regulation is that it pitted short-term consumer benefits, such as low prices, against the long-run benefits from capital investment and innovation. Unfortunately, regulators often sacrificed the long-term interest by forcing an infrastructure owner to share its physical wires with competing operators at a cheap rate. Thus, the regulated company never had a strong incentive to invest in new infrastructure technologies — a move that would considerably benefit the competing operators using its infrastructure.

Europe’s experience with the unintended consequences of unnecessary regulation is perhaps the most useful lesson the U.S. can learn from abroad.

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