Better Broadband Better Lives

Tech Policy Expert Sees U.S. on Right Path to Broadband Growth

in NTIA/Recovery Act by

WASHINGTON, July 31, 2009 – The federal government and broadband grant seekers should be careful as they seek policy to ensure it doesn’t hinder the spreading of high-speed communications system across the nation, a former Commerce Department official and broadband expert said.

Internet Innovation Alliance Co-chairman Bruce Mehlman, who was assistant secretary of Commerce for technology policy during the most recent Bush administration, told that although many parties with an interest in the debate are displeased with the National Telecommunication and Information Administration’s broadband initiative, the state of the nation’s broadband is not dire.

“Speeds have gone up, prices have gone down, percentages of populations served have expanded,” he said.

But he noted that “the tenor of many of the comments [to the broadband plan] is that the sky is falling and America is the broadband Banana Republic.”

Mehlman pointed to a new study, “The Substantial Consumer Benefits of Broadband Connectivity for U.S. Households” by Jonathan Orszag, Mark Dutz and Robert Willig as evidence that the broadband situation in the United States is healthy.

The study focused on five findings:

1. Consumers receive more than $30 billion of net benefits from the use of fixed-line broadband at home, with broadband increasingly being seen as a necessity;

2. With even higher speed, broadband would provide consumers even greater benefits – at a minimum of an additional $6 billion per year;

3. Significant broadband adoption gaps exist between various groups of households;

4. Among those who have a home broadband connection, there is no significant valuation gap based on race; and

5. The total economic benefits of broadband are significantly larger than our estimates of the consumer benefits from home broadband.

Mehlman said the report shows broadband is an “experience good.” Once people experience it, they value it much more highly than they ever thought they would, which could explain some of the adoption gaps. In effect, to expand broadband by focusing on unserved areas is a good investment, but one that should be done regularly by the private sector.

Broadband also has seen growth through private investment and not just from the government’s coffers, he noted.

“We should recognize that there is an annual investment of $60 to $80 billion that is not government money,” Mehlman said, citing data from researcher Yankee Group. “We should make sure that government decisions don’t deter that investment.”

“In a healthy market you will see adoption up and down the workplace,” he said, “and I’d like to continue to see the wireless versus wireline versus cable versus powerline arms race.”

Mehlman’s attitudes reflect those by economists at a broadband plenary last month held by the Progress and Freedom Foundation. Economists at the event differed on exact reasons why the United States has a successful broadband competition, but said the market works. They said too much regulation – rather than incentive – would be a bad thing.

Emperis Managing Partner Jeffrey Eisenach had said at the PFF forum that regulation of the broadband market would discourage innovation and that “regulations…don’t give enough credence to how capital markets work.”

Mehlman said the federal government should be careful in setting regulation “With mapping underway you shouldn’t presuppose strategy,” he said, referring to the Broadband Data Improvement Act currently open for broadband mapping grants.

Mehlman said policy can make infrastructure investment harder or easier, and if you add regulation it will deter private investment - especially in the unserved and underserved areas, those of prime focus in the current notices of available funds.

“Things are going right,” Mehlman said of the competition, and that any new policy should be done “with caution and humility.”

1 Comment

  1. I find it interesting how you keep reporting on these fringe economists that think broadband is a competitive market. These are essentially the same hired guns that spent decades claiming that nicotine was addictive. When these are the voices reported, we should be surprised to see the U.S. falling behind even as industry assures us we are not.

    Mehlman is quick to point to the money spent by the private sector but does not mention they are treading water – not investing for the future. They are depreciating greater amounts. While the broadband in the U.S. is expanding, it is not doing so fast enough. We benefited by expediting the expansion of electricity during the Great Depression. We certainly could have waited until it “naturally” expanded to everyone (sometime in 2040 maybe) but we chose to speed it up and our economy massively benefited from it.

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