Saturday, September 01, 2007

Why connectivity is fast and cheap in Japan and is not in the US

We have seen that US Internet connectivity is rapidly falling behind other nations. This Washington Post article on Japanese connectivity sheds some light on the physical and policy differences that have led to their success. Japan has newer telephone infrastructure and is more densely populated than the US, but. more importantly, their policy makers have created competition where the United States has left control in the hands of powerful telephone and cable companies.

The US Congress sought to introduce competition by passing the 1996 Telecommunication Act. William Kennard, chairman of the United States Federal Communication from 1997-2001 was frustrated in implementing the Act. Near the end of his term he said “all too often companies work to change the regulations, instead of working to change the market,” and spoke of “regulatory capitalism” in which “companies invest in lawyers, lobbyists and politicians, instead of plant, people and customer service." He went on to remark that regulation is “too often used as a shield, to protect the status quo from new competition - often in the form of smaller, hungrier competitors -- and too infrequently as a sword -- to cut a pathway for new competitors to compete by creating new networks and services.”

The telephone and cable companies succeeded in stopping the intended competition, and now the US is falling behind. What are the implications of that failure?