competition fail

lineartestpilot/Shutterstock

Voices


Twenty-five years ago, America was seized with fear that Japan would overtake the U.S. Those fears proved false. Japan has suffered a recession for more than two decades, and today we welcome Japan’s participation in America’s economy.

In the last decade, both Japan and the U.S. made significant investments in fixed and mobile broadband, each investing tens of billions annually with per capita expenditures for both countries well above $200 per person, some of the highest rates in the world, even exceeding South Korea. But Japan has peaked in broadband investment; the U.S. is still investing. In just the last three years, wired and wireless providers have invested more than $250 billion into America’s infrastructure.

Unlike the U.S., Japan, for all its broadband investment, has not managed to capture significant value in the Internet industry. The U.S. has some 15 Internet giants, but Japan has only two: Yahoo Japan (a joint venture between SoftBank and Yahoo) and Rakuten, a Japanese e-commerce website. Indeed, almost all Japanese companies and households still use fax machines — 1.7 million units were bought in 2012.

Just like the unfounded fears of Japan taking over America, a new bogeyman has been invented — an argument that America is allegedly falling behind Japan and other regions in broadband. This scare tactic has been employed opportunistically both by those who advocate government intervention in broadband and by companies with a regulatory objective.

While certain critics love to conjure a European broadband utopia, as an American academic at a Danish university, I am hard-pressed to find a European who would subscribe to such a notion. Indeed, European Commissioner for the Digital Agenda Neelie Kroes observes that Verizon LTE reaches more than 90 percent of Americans; no European carrier can claim the same for Europeans.

This week, SoftBank CEO Masayoshi Son, Japan’s richest man, who turned SoftBank into the country’s most profitable operator, spoke to the U.S. Chamber of Commerce in Washington, D.C.

Son likes a challenge, and sees turnaround potential in Sprint, an operator plagued by bad technology decisions and poor management. In rather contradictory remarks, he praised the U.S. for being the best country in the world with the greatest Internet economy (and an Internet GDP bigger than the total GDPs of Switzerland, Sweden, Ireland or Israel), but conjured the bogeyman with the hope to win regulatory approval for a possible attempt of Sprint to acquire T-Mobile. He made false provocations about America not being competitive, while forgetting that Japan has greater market concentration than the U.S., and a government-owned incumbent.

Son described the mobile Internet as the “most important infrastructure for the 21st century,” but mischaracterized America’s leadership, citing OpenSignal’s flawed study of 16 random countries, which ranked the U.S. 15th in LTE speed. A far more reliable measure of broadband speeds across major networks is Akamai’s quarterly report, which shows a consistent gain for the U.S. from 2009 to today. According to Akamai, five states and Washington, D.C., if ranked globally, make the Top 10 for average connection speeds. Akamai also found that U.S. peak mobile speed doubled — from 7.5 megabits per second to 15 Mbps — between 3Q12 and 3Q13, and average peak broadband speed rose from 29.6 Mbps to 37 Mbps.

The U.S. can’t be falling behind in speeds if the most reliable measure shows gains year after year, and it’s not possible for the U.S. to be world’s biggest Internet economy while having subpar broadband networks.

Son knows that competition in the mobile industry comes from technology, not the number of competitors. This fact is evident in Son’s jettisoning Sprint’s Kansas headquarters to set up command central in Silicon Valley — next to Google and Apple, companies about which he grumbled at the 2011 Mobile World Congress, “take all the upside while the mobile providers become dumb pipes.”

Complaining that the industry is not competitive is a frequent ploy by the third or fourth competitor to compensate in sympathy for what it lacks in business practice. But AT&T and Verizon are not to blame for their competitors’ mistakes. Son knows that at the end of the day he has to make results, not rely on an imaginary bogeyman that America is allegedly falling behind.

Roslyn Layton is a doctoral fellow in the Center for Communication, Media and Information Studies at Aalborg University in Copenhagen, Denmark. She is also a vice-president of Strand Consult, an independent consultancy for mobile operators, and a visiting fellow at the American Enterprise Institute. Reach her @RoslynLayton.



5 comments
bigtopia
bigtopia

I have yet to find a city in Korea that does not have free 2MB broadband.  In 2006, when I lived in Korea, I had 1GB up and down DSL speeds at my house for around $80 US.  When I got back to the US, my mobile provider informed me that my data plan was 5GB.  I asked "per second?"  They responded "per month." To say that the US is falling behind is not some ploy, Dr. to be Layton.  It's real, and the companies you consult are some of the main reasons.  Let's get more competition and less corruption in American service providers.

JoeyR.
JoeyR.

what Paul said.  The 'fail' in American mobile isn't bandwidth, it's the obscene bend-over of customers.  Until T-Mobile came along, the lowest price you could pay for iPhone service was about $70/month.  Even if you didn't want data or texts - that's $70 for dial-tone.

Paul Houle
Paul Houle

This kind of "research" is the new global warming denial,  except it is brought to you by Verizon and AT&T instead of Exxon and Mobil.


Americans want gigabit fiber,  they don't want LTE networks that cost $10 a Gigabyte.


Contrary to propaganda,  FTTH is the cheapest way to provide internet service in the long term to urban,  suburban,  and rural locations.  Other kinds of service cost less at the beginning,  but other alternatives require expensive power consumption,  expensive hardware with a short lifetime,  vulnerable outside plant that fails calling outages,  and generally higher costs.  In the case of wireless networks,  customers start paying these higher costs right away.


$10 a Gigabyte LTE is a dream destroyer.  No longer can you afford to download a $20 game that is a 4G download (yep,  the games industry will disappear except for Candy Crush Saga.)  No Netflix,  No Youtube,  unless you're a billionaire.  No online backup.  No downloading security updates for your OS.  (Except they'll sue you all the way to bankruptcy court when a virus you got because you couldn't afford security updates gets you a $10,000 bill.)


Maybe they'll have to start putting optical discs in tablets...

CrankyFranky
CrankyFranky

JoeyR is correct.Here are some real-world numbers for you:in New York City, my DSL broadband connection provided by Verizon maxes out at 3Mbps. (Yes, that's "three.")May I repeat:that's in NEW YORK CITY, not some distant, hard-to-reach backwoods area.Apparently Verizon and Time Warner Cable (the only broadband providers in NYC) have a no-compete deal, so customers like me have no place else to go for a decent Internet connection.I applaud Softbank's Masayoshi Son for injecting some competition into the U.S. broadband market, and I hope he's successful.

JoeyR.
JoeyR.

This has got to be the dumbest article ever.  When people are talking about America's broadband fail, they aren't talking about *mobile*.