October 16, 2009
Following a request by the Federal Communications Commission (including chairman Julius Genachowski '91), the Berkman Center for Internet & Society at Harvard University recently conducted a major independent review of existing literature and studies about broadband deployment and usage throughout the world. The project, designed to inform the FCC’s efforts in developing the National Broadband Plan, resulted in a report that is now available on the FCC’s site. The report is open for public comment on broadband.gov until Nov. 16. Yochai Benkler ’94, the Berkman Professor of Entrepreneurial Legal Studies at Harvard and faculty co-director of the Berkman Center, headed the project. In conjunction with the release of the report, he recently answered some questions about its findings, in a Q&A with Harvard Law School's Office of Communications:
Why is the FCC asking for this report now?
In the American Recovery and Reinvestment Act, Congress charged 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 ten 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.
How did you go about this process?
We surveyed a lot of the existing literature and data analyses. We did a substantial amount of our own independent analyses of all of the attributes of interest: of penetration, capacity, speed, and prices, in a large number of countries, and I think that we’ve come to a very good sense of which countries have done well and which countries have done less well, and also of a likely explanation for what countries that have done particularly well have done as a policy intervention.
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?”, and 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?”, and 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, the President 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 multi-dimensional 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, particularly 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, because 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 can we 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, which is warranted by the evidence we found, 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, because it’s possible that everyone else is talking nonsense and we know the truth, or it’s possible that we’re missing something. This I’d say is the most important part of the report. 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 and when it happened and how it happened. 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 than 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 these 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 FCC 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, and that’s what we’ve tried to do and I think we’ve done a good job of it.
How did you come to be involved in this project?
The short answer is that this particular FCC, Chairman Genachowski in particular, is interested in pulling insights and talent from across a wide range of organizations and views, by both people he’s hired into the organization and external sources. I’ve written about this subject; I think the Berkman Center is widely recognized as a major research organization in the field, trying to understand the implications of the Net and what makes it run, so I think they turned to us because they wanted a genuinely independent review that was not part of the internal process and was not subject to the same constraints as the internal process, to give an independent view. I hope what we’ve given the Commission is in fact precisely the kind of solid independent analysis of the data that they need.
So what next?
The report is up on the FCC’s website as of October 14. It’s open for public comment on both the data and the implications. We will be reading these comments. We will be trying to incorporate what we can in terms of improving the quality of the report. And then we’ll present the Commission with the final draft.
In the public comment phase, we’ll continue to play this role that is integrated into the process—exploring and characterizing the facts. After we submit the final report, we can move into the mode of citizen, and work through the implications of our analysis for discrete potential policies that the FCC could either pursue or recommend to Congress to implement. But at this point it would be premature, as long as the process is ongoing and we’re still trying to learn from the comments, to try and plan what we do next.
