NCPA - National Center for Policy Analysis

United States Lags in High-Speed Internet Connections

January 30, 2004

From 1995 to 2000, cell phone users have increased 1200 percent and Internet subscribers have increased from 18 million to 166 million, creating a well-spring of jobs and economic growth for economy. Yet the United States ranks 11th in the world in high-speed Internet connections per capita, according to a study by the International Telecommunications Union.

One of the reasons is Federal Communications Commission (FCC) regulations discourage companies from investing in broadband deployment, says Jay Lefkowitz, former head of the White House Domestic Policy Council. Consequently:

  • Some 900,000 jobs have been lost in the telecom and information industries since 2001.
  • Investment by the telecom industry has declined by $60 billion, since the $2 trillion telecom boom in 1999.

Lefkowitz blames the decline on "unbundling," which requires telecom companies that own fiber-optic networks to allow competitors to use it for a nominal fee. He says companies are less likely to invest money in such endeavors if their competitors will then be allowed to share in the benefits without the investment risk.

The FCC ostensibly has lifted the unbundling requirement on telecom companies, noting that such rules are unnecessary and hurt competition. However, the FCC law is inconsistent, requiring unbundling in some circumstances (such as apartment buildings) and not others, and creating confusion surrounding when and where states can require unbundling.

As a result, some companies are ready to invest in broadband but are reluctant to do so until the finer details of the FCC rules are ironed out.

To stimulate broadband deployment, Lefkowitz recommends lifting unbundling regulations on lucrative broadband markets (such as apartment buildings and condominiums), deregulating fiber deployed to businesses, and exempting the Internet from the traditional rules that govern voice services.

In other words, let the invisible hand of the marketplace work.

Source: Jay Lefkowitz, "Strike Up the Broadband - What the FCC Can Do For the Economy," Weekly Standard, January 26, 2004.


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