As senators consider President Obama’s nomination of Tom Wheeler to lead the Federal Communications Commission, some observers have painted a dire picture of the state of Internet availability in America. One legal scholar, Susan Crawford, has argued that “prices are too high and speeds are too slow,” though she supports Mr. Wheeler, a venture capitalist and former telecommunications lobbyist. Other critics have called for new government policies to “fix” the telecommunications industry.
Such criticisms are misplaced. If he is confirmed, Mr. Wheeler will have the good fortune to be arriving at the F.C.C. at a time when the United States has gained a global leadership position in the marketplace for broadband.
More than 80 percent of American households live in areas that offer access to broadband networks capable of delivering data with speeds in excess of 100 megabits per second. Almost everyone in the country has several competitive choices for high-speed broadband service (with wireline, satellite and wireless options). Verizon offers 14.7 million consumers, in parts of 12 states and the District of Columbia, speeds up to 300 megabits per second via our FiOS network, which is poised to provide even greater speeds in the future. Companies like AT&T, Comcast and Time Warner Cable are also investing in their infrastructure.
Fifty-six percent of American adults have smartphones that give them access to mobile broadband data and video. Our country is the center of a booming mobile ecosystem in which new devices and applications are being used to do everything from personal health monitoring and e-commerce to tracking deliveries and saving energy.
Contrast this with the European Union, where innovation and investment in advanced networks have stagnated under an onerous regulatory regime that limits investment and innovation, and where today only about 2 percent of households have access to broadband networks with 100-megabit-plus speeds. “Once, Europe led the world in wireless communication: now we have fallen behind,” Neelie Kroes, the European Union official responsible for broadband policy, said in a speech in January. “Europe needs to regain that lead.”
The United States built its lead because companies invested nearly $1.2 trillion, over 17 years, to deploy next-generation broadband networks. These investments, which began with the passage of the Telecommunications Act of 1996, were neither accidental nor inevitable; they were a result of deliberate policy decisions by Congress and by Democratic and Republican administrations alike to protect consumers while encouraging companies to invest in nascent technologies that are now flourishing.
President Bill Clinton’s administration decided not to impose, on the Internet and wireless technologies, century-old regulations designed for copper networks. Michael K. Powell, the F.C.C. chairman during President George W. Bush’s first term, presided over the decision to exempt new fiber-optic networks from the old regime of price controls and rate-of-return regulation. The fast deployment of 4G LTE mobile broadband networks across the country might not have happened had Julius Genachowski, the most recent F.C.C. chairman, imposed a heavy-handed regulatory approach toward the technology.
Regulatory restraint has resulted in a robust broadband market, but today some self-styled policy advocates insist that America’s broadband marketplace is badly broken and that the only solution is to revert to Depression-era regulations, like government rate setting and price controls or rules dictating what types of competitive offerings broadband providers can offer consumers. These ideas, however, are part of the rigid bureaucratic approach that European regulators like Ms. Kroes have correctly identified as stifling.
Since 1996, as America encouraged the growth of its broadband industry, European regulators have adopted policies that generally limited network infrastructure deployment to a single facility in a given country or region. Other companies were allowed to “resell” broadband services to consumers, but only if they used the same infrastructure. This “retail” competition resulted in prices that may have covered the costs of operations but left little capital or other incentive for companies to invest in improving these networks. In other words, a decade ago the European broadband market may have looked healthy from the standpoint of consumer pricing, but after 10 years of underinvestment, European households (only half of which have access to networks capable of speeds of even 30 megabits) have far fewer broadband options and innovations than their American counterparts.
Regulatory prudence is the only way to keep up the momentum in broadband innovation. We are just beginning to see the potential of innovative cloud-based services, smartphones and tablets to transform education and job training. A recent study found that cloud computing could save enough energy to power Los Angeles for a year, the equivalent of 23 billion kilowatt-hours of electricity. The broadband ecosystem is more than service providers and carriers. Our regulatory system needs to protect consumers while allowing market participants — developers of mobile applications and operating systems, handset manufacturers or operators of mobile virtual networks — to innovate.
There is no telling what will come out of this next wave of change. For its potential to be fully realized, however, it will be critically important for the industry to work with regulators — led, we hope, by Mr. Wheeler — to continue the bipartisan policies that have made our fast-changing industry a global leader.
Lowell C. McAdam is chairman and chief executive of Verizon Communications.