Aside from a brief experiment from 2015 to 2017, broadband networks in the United States have been loosely regulated, and the success of this approach speaks for itself.
By comparison, the European Parliament promulgated strict, interventionist “open internet” regulations on prices and traffic in 2015, which have since been tightened, including a ban on the use of free data. Americans are twice as likely as Europeans to invest in, deploy, and enjoy next-generation networks.
Analysis of two decades of comprehensive broadband data in many OECD countries (including South Korea, Japan, Australia and New Zealand, which have never imposed strict “open internet” rules) reveals a light-touch approach to boosting connectivity It confirms the superiority of
To measure the causal impact of open internet regulation, a group of European economists conducted an in-depth study of broadband investment using data from high-speed wired networks (fiber-optic, cable-based). This study models the broadband market in a simplified two-sided market framework and performs a series of calculations and regressions. The dataset consists of OECD figures for 32 countries from 2000 to 2021, covering the entire high-speed broadband network era and all major policy changes in the past.
Open Internet regulations have a significant negative impact on fiber investment
Strong empirical evidence emerges that open internet regulation has a significant and strong negative impact on fiber investment, which is also consistent with the extensive literature on the impact of access regulation on infrastructure investment. In contrast, there is still no empirical evidence to support the predictions of net neutrality proponents.
This finding also raises major concerns regarding investments in next-generation wireless networks such as 5G, where the business case critically relies on quality differentiation possibilities such as network slicing. In fact, there is a visible correlation between countries imposing strict net neutrality regulations and the subsequent slowdown in the rollout of new fiber-based and he 5G broadband, as the EU has This suggests that we are far behind in terms of adoption.
To put it into perspective today, annual capital spending on broadband infrastructure in the United States exceeds $100 billion per year, more than double that of the European Union. 5G coverage in the EU is spotty, with less than a third of Europeans having 5G installed, compared to 60 percent of Americans, according to Ericsson and the GSMA. . The OECD notes that the United States has a slight advantage in fixed-line high-speed broadband penetration per 100 people, despite having a much lower population density than the EU.
Importantly, the United States conducted a natural experiment using such rules for a few years. Nothing bad happened when they were removed. ISPs did not block or restrict end users or content providers. In fact, network performance has improved in terms of speed, technology, throughput, competitiveness, cost performance, and bridging the digital divide.
Moreover, open Internet policies imposed only on some segments of the Internet value chain are becoming increasingly ineffective due to important technological developments, such as different types of (unregulated) private networks and content distribution networks. EU-style net neutrality regulations will drive that outcome. The regulatory and technological complexities involved create significant market uncertainty and compliance gray areas. The latter further reduces incentives for investment and innovation given current (5G) and upcoming (6G) technologies.
EU policymakers have lamented the region’s low broadband investment and lack of next-generation communications services. Interestingly, the UK relaxed its open internet rules upon her exit from the EU. While this policy clearly benefits large software platforms and video streaming providers, it harms consumers by driving out innovation in broadband networks and meaningful differentiation of services for customers. It turns out that.
The Biden administration has laudable goals for ubiquitous high-speed broadband and affordability. However, it is unlikely that these goals would be achieved under a return to Title II reclassification of broadband, which would unwittingly make broadband deployment slower and more expensive. Now, the FCC is poised to go a step further by not exempting broadband providers from Section 214’s provisions (as in the 2015 rule).
Under the proposed interventionist regime, the FCC would require broadband providers to apply to acquire, add, remove, or “retire” broadband “lines.” It’s worth noting that this will slow down your provider’s ability to retire his copper DSL lines and replace them with fiber or add new wireless or satellite broadband connections.
Strong regulations have not improved broadband investment and deployment in the European Union, and the same is true in the United States. The FCC should be careful before undoing its accomplishments.
Wolfgang Briglauer is a Senior Researcher at the Vienna University of Economics and Business and Head of the Digitalization and Regulation Research Section at EcoAustria in Vienna. This expert’s opinion is limited to Broadband His Breakfast.
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