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Analysis: Why U.S. Telecom Has Fallen Behind

U.S. telecom companies place the blame on the geographic factor. Unlike the countries that top the list of the most broadband subscribers per capita - Korea, Hong Kong, Switzerland and Taiwan to name a few - the United States faces a geographical and population-density challenge, making it harder to provide access to remote areas of the country.
by Donna Borak
Business Correspondent
Washington (UPI) Aug 18, 2005
The United States has characterized itself as the leader in broadband technology and innovation, yet it is ranked 16th in the world in providing broadband services to consumers.

A report released last week by the Free Press and the Consumer Federation of American said that despite claims by the Federal Communications Commission that the United States is on track for achieving its goal of universal and affordable high-speed Internet to Americans by 2007, it is lagging behind countries like Korea, Canada and the Netherlands.

Both European and U.S. industry leaders have pointed to a multitude of reasons for the low ranking, including the late adoption of broadband technologies by the United States, its massive geographical size, population density, federal regulations and lack of competition.

Only in the last five years has the U.S. telecom industry been able to create a broadband market, a fact that has left it behind other countries in Europe and Asia that have been more aggressively deploying broadband services to consumers during the same period.

"I think it's fair to say that although we didn't get our act together as fast as other countries did in terms of our policies with respect to broadband, a lot of progress has been made in the last year or two, and that helps a lot for the country to catch up," said Verizon Vice President of Internet Technology Policy Link Hoewing.

Craig Aaron of Free Press said the U.S. telecom industry has fallen behind because the Bush administration and the FCC have pursued policies that have discouraged innovation and competition, while countries like Japan and Korea have opened up access by creating incentives to private companies to create networks.

"In some of the other countries, they've opened up lines, where here we've actually been doing away with open access," said Aaron.

While about 34 million households have some kind of broadband service, rural areas have been left behind in gaining access to Internet service. According to Aaron, only one in 10 U.S. homes has Internet service in rural areas.

U.S. telecom companies place the blame on the geographic factor. Unlike the countries that top the list of the most broadband subscribers per capita - Korea, Hong Kong, Switzerland and Taiwan to name a few - the United States faces a geographical and population-density challenge, making it harder to provide access to remote areas of the country.

"The countries you see on the top of that list are smaller, densities are a lot higher, and somewhat easier for them to deploy the technologies," said Hoewing.

Another factor that facilities easier deployment in other countries is the predominant use of DSL, rather than cable modems, which have traditionally been used in the United States. As a result, shorter lines create a local loop that helps provide more service to an area.

However, Aaron refutes the argument that size matters when it comes to providing service, citing Canada, No. 5 on the list, as an example of a country of relatively similar size.

Instead, Aaron explained that the reason the United States has fallen behind has been the result of the federal regulation process and a broadband market dominated by a duopoly between cable and DSL providers that has prevented a broadening of access to consumers and discouraged an increase in the number of access providers.

"Both the cable and phone companies have gone out of their way to try to keep hold of the entire market," said Aaron. "There hasn't been a lot of incentive to innovate and provide new services."

Although European entrepreneur Nick McMene my, founder of Interoute, a European network, agrees that providing broadband technology is "geographical dependent," he also argues that strict U.S. regulations have disabled the broadband market from growing rapidly.

Using the example of the United Kingdom's British Telecom, McMenemy explained that when BT broadband-enables a local exchange, regulatory authorities mandate that the company make the exchange available to all the other license operators in order to provide services to customers in a particular region - a regulation process that the United States has been slow to implement.

"We're making up ground pretty fast. The fact is that today about 34 million households have a broadband connection, which is not too bad, given the fact it's only been five or six years since we had a broadband market," said Hoewing.

To companies like Verizon, the "lack of competition" argument is obsolete. "Though it may seem anti-competitive, the Brand X case and the deregulation of DSL by the FCC will do a lot to stimulate investment and deployment of broadband networks," said Brian Blevins, director of external communications for Verizon.

Verizon claims that competitive pricing, with special introductory offers, has given consumers the opportunity to get faster Internet and broadband services at a lower cost. However, despite introductory deals, consumers are still faced with paying heavy telecom taxes, which make up 25 percent to 30 percent of their phone bills.

All rights reserved. 2005 United Press International. Sections of the information displayed on this page (dispatches, photographs, logos) are protected by intellectual property rights owned by United Press International. As a consequence, you may not copy, reproduce, modify, transmit, publish, display or in any way commercially exploit any of the content of this section without the prior written consent of United Press International.

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