Let's learn some lessons about broadband

These rules were stipulated as part of telecommunications reform laws passed in 1996, and were designed to break the monopoly control still held by local providers. To opponents such as Hollings, it would reduce the providers' incentive to open their landlines to competition, thus deferring a competitive market in fixed line telephone service.

Fixating on competition in the provision of local phone service, however, risks depriving the general public of the economic benefits of local phone monopolies' investment into alternative communicationtechnologies. Other countries, when faced with large, state-protected monopoly telecommunications companies even more rigid than pre-breakup AT&T or the current local providers, have made very differentpolicy choices. As their examples show, sometimes it makes more sense simply to stop protecting a monopoly and let the market figure out a way to compete with them.

With 47.3million people and a per capita income, at purchasing power parity (PPP), of $17,510 USD, South Korea is an economic miracle. Less than 50 years ago, South Korea was a war-ravaged country with a per capita income of $87 USD. Today, along with a rich nation standard of living, they also boast the mostwidespread broadband network in the world, at 10million users. As a point of comparison, approximately60 percent of all Web surfers use broadband in South Korea, compared to 13 percent in the United States.

KT is the leading broadband provider, with a 50 percent market share. They also happen to be theformerly state-owned and state protected KoreaTelecom, which still has a 98 percent share of the local phone service market(compared to the 91 percent share controlled by America's local "bells").

The South Korean economy benefits greatly from its wired status. With ubiquitous broadband connections comes an extremely sophisticated user base. This makes South Korea a laboratory for the newest broadband-oriented gadgets and services. "We have a guy posted there all the time on the lookout for deals," saysBrian Baglow, an executive at Digital Bridges Ltd. in Scotland, an online gaming company which stands to benefit from broadband's popularity. "We're very, very focused on Korea because it has such an advanced user base."

NTT DoCoMo is an offshoot of NTT, or "Nippon Telephone and Telegraph." Like KT, NTT is a former state-owned monopoly that accountsfor 95 percent of the local phone market (though that dominance is being challenged by the cableindustry).

What is interesting about DoCoMo, however, is its status as the leading provider of wireless service in Japan, with a60 percent share of the market. NTT DoCoMo has popularized the use of its wireless network through the trend-setting iMode service. iMode is to WAP what high definition, flat panel TVs are to black and white "boob tubes" of the 1950s. DoCoMo makes it a point not to call its product "the wireless internet" so as not to create exaggerated expectations among itscustomers. However, with color screens, a display protocol based on HTML, and a business model that enables iMode service providers to generate revenue through the iMode network, it's the closest experience in the wireless world to the wired internet, and profitable to boot.

NTT DoCoMo is currently well into it's rollout of 3G, an event driven by the success of its iMode service. They have the luxury of thinking about the next evolution in wireless broadband (4G) while the rest of the world endures the low kilobit speeds typical of WAP and GPRS.

Japan's and South Korea's approach to their respective telecommunications monopolies teaches us a number of things. First, it shows the essence of speed in technology markets. As the first countries to have widespread broadband or a popular "wireless internet", South Korea and Japan are positioned to benefit economically from the explosion of services madepossible by the presence of these networks. Compare Japan and South Korea to the United States at the start of the 1980s client/server revolution and you will see many similarities.

Second, dominance in one market does not necessarily translate into dominance in a second market. Granted, NTT DoCoMo is the number one wireless provider and Korea Telecom (KT) is the number one broadbandprovider. However, their markets shares are not that far off from that held by AOL in the American ISP market. In other words, healthy chunks of the market are held by competitors, making them far more competitive than local phone service in either country. Likewise, KT isn't the dominant wireless provider (ranked second behind SK Telecom), while NTT lags cable providers in the provision of fixed line broadband. Even more important, however, is the fact that Korea and Japan HAVE a robust broadband andwireless market, leading to immeasurable economic benefits that far outweigh any presumed consumer harm derived from their near total control of local phone lines.

Third, removing government protections rather than applying the chainsaw (as America did to AT&T) leads to a blossoming of market competition without all the economic turbulence and expense of a dismemberment. Buyers aren't blind to cost, and will find alternatives (or alternatives will find them) even if monopolists with total control of the market attempt to overcharge. Granted, the evolution does not happen overnight. In the meantime, however, customers benefit from the deep pockets and industry experience of the monopoly telecommunications provider applied tonew communications markets.

The widespread deployment of broadband service creates economic opportunities that enrich the general public. Hampering the players most likely to roll out such services, even in defense of local phone servicecompetition, does not justify the loss that delays have entailed for the American economy. DSL stands to be the most popular broadband access technology, with estimates claiming a 60 percent share by 2006. The local phone service providers are the most logical source of DSL due to their control over phone lines. Slowing that rollout does little else besides deprivethe US economy of trade made possible by the presence of broadband networks.

American had a phone monopoly due to past regulations that protected AT&T from competition. The solution to AT&T's local phone service descendants might not be ongoing government regulation, but a decision to stopthe regulation and allow the market to heal itself.

John Carroll is a software engineer who lives in Switzerland. He specializes in the design and development of distributed systems using Java and .Net.