Sunday, April 17, 2005

Broadband regulation

We should follow Japan's example:
The [Japanese] government quickly removed many regulatory obstacles. But because cable providers were mostly mom-and-pop operations in rural areas, officials realized that they would also have to create a highly competitive private-sector environment. So the telecommunications ministry came up with one of the most competitive regimes in the world: it compelled regional telephone companies to grant outside competitors access to all their residential telephone lines in exchange for a modest fee (about $2 per line a month). The antitrust authorities also ensured that these companies did not create obstacles for their competitors, helping provide a level playing field.

The results were extraordinary. Yahoo! bb, created by Masayoshi Son's venture-capital firm Softbank, and several other companies soon entered the DSL market. Yahoo! bb began offering high-speed service five times faster than current U.S. broadband for $22 a month. After aggressive marketing forced its competitors to meet Yahoo! bb's price, high-speed DSL subscriptions skyrocketed. By the end of 2002, such access was available to many more than the 30 million Japanese households the government had targeted. Within another five months, a greater percentage of homes in Japan than in the United States had access to broadband.

Thanks to the government's competitive framework, the speed of the DSL service offered also rose dramatically, from 8 megabits per second in 2001 to 12, 26, and 40 megabits today. (The typical U.S. broadband connection, whether DSL or cable, is still only 1.5 megabits per second or slower.) Meanwhile, the price of monthly subscriptions remained stable, even for 26-megabit access speeds, at about $22 per month -- by far the lowest price in the world. By September 2004, 15.3 million Japanese subscribed to high-speed broadband. Moreover, for an additional $5 per month, users of Yahoo! bb can also have Internet telephone service. One in every 25 telephone calls in Japan is now made over the Internet, and the number keeps growing.

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