Why open access won't fix our telecom mess

Continuing my previous post, the biggest problem I have with Thomas Bleha's prescription for fixing what ails American broadband is its requirement of open access. At first blush, that might seem a good idea. You can't have 20 wires running into the home. Given those physical constraints, make sure the few lines which are there act as a "common carrier" for other's services.

Unfortunately, the side effect of such a model is that it reduces the incentive to spend the money to upgrade lines to support new technology. If they must share access to the lines, the upside on an upgrade is greatly reduced given that they don't get to keep all the financial benefits.

Of course, this would also apply to Japan, but it may have less of an effect due to higher levels of enthusiasm for new technology and higher population densities. In other words, it already costs less to roll out high-end broadband infrastructure in Japan, and government incentives (of the sort lacking in the U.S.) may go a long way towards making up the cost difference.

Even with more financial incentives, though, the U.S. must rely on companies to do more of the heavy lifting. Therefore, it makes sense to encourage not just competition on existing technology platforms, such as fixed line phone access, but also competition across platforms. This is the true aim of the current policies furthered by the FCC, as the Economist noted in an article critical of Bleha's thesis:

The industry regulator, the Federal Communications Commission (FCC), has tried to make it costly for rivals to piggyback on the infrastructure of today's telecoms and cable firms in order to create an incentive for them to compete using alternative infrastructures, such as powerlines or wireless.

"This is more competitive, more sustainable, and easier to administer," says Michael Powell, who quit as FCC chairman in March. "That means in the long race we're behind the pack for awhile, but we're trying to create three or four platforms."

Bleha does make a good point regarding vested interests, which might slow rollout in order to avoid cannibalizing existing revenue streams (voice phone acess and traditional movie broadcasting). On the other hand, companies everywhere share one thing in common: They want to grow. Korea's KT (also a former monopoly telecom) drove the broadband revolution in South Korea through DSL, even though they still earned all the revenue from fixed-line access. They did this because they wanted to grow. The same applies to American telecommunications companies.

Bleha also doesn't consider the different approach Japan took to dealing with its big telco monopoly. NTT DoCoMo has done great things, inventing iMode and driving a mobile phone revolution that has made Japanese wireless technology a world beater. On the other hand, NTT is also the company that used to be Japan's state telecommunications monopoly. Japan no longer protects them from competition, but they did not break them up into a bunch of smaller pieces, as America did in the 1980s.

America is a big country, and a big country needs a nationwide telecommunications company in order to service its needs. I don't have proof for this, but name a country where a nationwide telecommunications company doesn't exist. It doesn't have to be a protected telecommunications monopoly, mind you, but that doesn't mean that government design of the shape of the telecommunications industry is necessary, either (as was the case with Judge Greene's breakup plan for AT&T).

I mentioned in my previous post that Canada is far ahead of the United States in broadband. Canada didn't break its state monopoly up the way Judge Greene did in the U.S. I'm sure there are more differences, but I'm not up on Canadian telecommunications history (yet). Once I am, expect a blog entry.