Faculty Q&A: Yochai Benkler

Outliers and open access

At the request of the Federal Communications Commission, Professor Yochai Benkler ’94, faculty co-director of the Berkman Center for Internet & Society, headed a major Berkman Center study this summer on global broadband deployment and usage. In a Q&A with HLT, Benkler discusses the report’s findings.

Why is the FCC asking for this report now?

In the American Recovery and Reinvestment Act, Congress asked the FCC to produce a national broadband plan. Something like this is going on in many places around the world, as countries are transitioning to what is generally called “next generation connectivity.” This mostly means much higher speeds and ubiquitous access, so that, essentially, we will be seeing speeds that are 10, 20, 50 times the speeds that we’re currently looking at, within three to 10 years in different places. And we’re looking to a world where we all walk around with devices that connect us to this capability seamlessly, anywhere, anytime. The question facing all of these countries is, How do we get there as quickly as possible, with the best terms for consumers, without too much inequality in the ability to get to that set of capacities? That’s the challenge for the FCC, and that’s the challenge for regulators throughout Europe and in Japan. Several countries have already been through this process of next generation planning; several countries are currently in the midst of it, as is the United States. What the FCC asked us to do was find out what has happened in other countries. Our basic charge is to figure out how we learn from both the current plans and the experience of other countries, so that we don’t make their mistakes, and so that we can correct our own mistakes by looking at what they did well. That’s the purpose of this report, within the context of the national broadband planning exercise.

What were the key takeaways?

I think there are two pieces of news that will be most salient for people as they look at this report. The first is a response to the question, How are we doing? The answer is that we’re overall middle-of-the-pack, no better. The second responds to the question, What policies and practices worked for countries that have done well? The answer to that is, there is good evidence to support the proposition that a family of policies called “open access,” that encourage competition, played an important role.

First, there have been many arguments about whether the United States is doing just fine or whether we should be concerned. During the presidential campaign, Barack Obama expressed concern with the idea that the United States would be a middling performer, and that we needed to do better. One of the things that we’ve done is developed much more nuanced and multidimensional benchmarks than have been used in the past to allow us to answer the question, Is the United States in fact performing weakly? What we found across many dimensions on fixed and mobile penetration—that is to say, how many people have capacity—as well as on other core measures—particularly different approaches to measuring capacity, such as speed and prices—is that we’re very much in the middle of the pack. We’re somewhere in the third quintile of the OECD countries, which is not fundamentally different from what some of the more widely cited existing benchmarks show. We went well beyond simply accepting the existing benchmarks and statistics, like those of the OECD, however. We undertook additional new research, our benchmarks have many more dimensions, and we correlated independent studies with existing benchmarks to evaluate the level of confidence we can have in the findings.

I think a more important aspect of our benchmarking exercise is not so much what it shows us about the U.S., which is to confirm the image that we already know, but to actually give us a much more nuanced view of what the performance of other countries has been, so that we can now say, if you want to look at the Nordic countries, Norway isn’t actually like Sweden. Sweden is a good performer on all dimensions. Norway has higher prices. We can now make that differentiation. Until now, people have looked at Italy and said, “Oh, Italy has low penetration; it’s not a good market.” But actually, using our benchmarks, you can that see Italy is a very good performer on mobile broadband. So, our new benchmarks give us a much more nuanced ability to target different countries for different kinds of observations so that we can interpret what lessons to take from their experience. At the end of the day, looking at other countries isn’t about a competition—who is first, who is second—it’s about whom we can learn from, what different aspects of their performance and of their practices we can borrow or avoid to make our own performance better. Our benchmarks actually provide a more nuanced and complete view of that answer than anything that’s been available up until now.

What about the second key takeaway, what you called in the report “the most surprising finding”?

Yes, the single most surprising and important finding of this study is that there is more or less universal agreement outside of the United States that a family of regulatory policies called open-access regulation has played an important role in successful performance on broadband penetration in the first generation. Not only was this important in the first generation, but it turns out that transposing the experience from the first generation to the next generation plays an absolutely central role in contemporary planning exercises throughout Europe and in Japan. It’s surprising because, in the U.S., discussion of open-access policies is largely a thing of the past. It used to be the main innovation of the 1996 Telecommunications Act that was passed by an almost unanimous Congress, but was the subject of hard-fought battles between the incumbents and the FCC through the courts throughout the late ’90s. It was then abandoned by the FCC in 2001 and 2002, and in U.S. policy debates has not really been considered part of the set of questions we need to think about ever since.

What surprised me was how much of an outlier the U.S. is in terms of even thinking about open access, whereas it is the central question everywhere else. Because we were so surprised at finding that this was the central issue, we ended up spending a lot more time than we had anticipated trying to collect the evidence and validate this belief. We’ve done very detailed case studies in 14 countries on their competition and access policies. We’ve done analyses down to the level of each company and its strategic response. We went into the political economy in each of these countries, between incumbent and the regulator and the courts. And what we found is that where open-access policies were not only enacted formally, but actually pursued by an engaged regulator, we saw new competitors entering the market, usually more innovative and agile than the incumbents. In most of these countries, these competitors continue to be very important players and seem to really separate out the markets where there are high speeds and low prices from the markets where there are low speeds and high prices.

We then did a very detailed company-level pricing study, looking at the closest analogues of next generation connectivity in all of these countries. We had data on offerings from 59 companies across these countries. The image is very captivating. In the one-third of the graph that is occupied by low speeds and high prices, we see most of the U.S. companies and most of the Canadian companies, with minor exceptions. What characterizes the North American markets is that they rely heavily upon the competition between a cable incumbent and a telephone incumbent. They don’t have open-access policies that are effectively enforced. They exist formally in Canada but are not effectively enforced there, for the prices there are the highest in the OECD for the relevant kind of access.

When we look at the very other end of the graph—the countries that have the highest speeds and the lowest prices—in each of these cases, there is an incumbent telephone company, and usually a cable company, but there is also a clutch of competitors who entered over the last seven or eight years using open access to build their own competing advantages—agile, innovative competitors that catalyze the market.

And then we also did some econometric reanalysis of the existing, most recent data on unbundling, which is one particular kind of open access, and penetration per 100, and again we found evidence in support.

So, our review of the international experience suggests that the U.S. is looking in a different direction from many other countries. And as best we can tell from the evidence, these other countries are not wrong to interpret their success as having been influenced to a significant degree by the adoption of [open-access] policies.

What do you anticipate will be the implications of this report?

We really have been trying to focus on getting the facts right rather than spinning out the implications. I think the Federal Communications Commission made a very smart choice to take this report in draft form and put it out for public comment, precisely so that we can get input on the research and its implications from many diverse sources and perspectives.

I’d say the minimum implication is that we need to think about the feasibility of open access, the desirability of open access, and the downsides of open access, and that it would be a mistake to simply ignore it as though there were no choice to be made, as we look forward to next generation connectivity, about whether or not we change direction. In the future we’ll be able to develop a more complete set of thoughts about what the implications are, but that’s not what our remit from the FCC is or was. Our remit was to look at the facts. That’s what we’ve tried to do, and I think we’ve done a good job of it.