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Oops! Professor Crawford’s Model Broadband Nation, Korea, Doesn’t Support Net Neutrality & Favors Market Concentration
Submitted by Scott Cleland on Tue, 2013-02-26 19:01
As Professor Crawford continues her book tour advocating for a broadband utopia of an ultra-fast, government-subsidized, public-utility-regulated, broadband network with net neutrality, the supposed-facts undergirding her proposal, are crumbling away.
As I explained recently in my analysis “Why Europe Is Falling Behind America in Broadband,” the next seven-year EU budget effectively eliminated any EU funding for broadband infrastructure investment. Consequently Europe, which is already 2-3 years behind America in upgrading to 4G LTE wireless networks and more fiber-rich wireline networks, is likely to fall even further behind because European telecoms don’t plan private investment in faster broadband either. Frustrated at the EU’s Crawford-esque, investment-killing, utility-price-regulation, Europe’s telecom companies see no prospect for any return on new broadband investment, so they won’t be investing – per Reuters. Simply, Professor Crawford’s European utopian prototype has crumbled badly under the weight of financial reality.
Another country that Professor Crawford likes to tout as a country that’s done better in broadband than America is Korea. Professor Crawford ignores the fact that with ten times the population density of the U.S, and much of their population living in apartment buildings, the national deployment cost of deploying fiber broadly in Korea is dramatically less expensive and more efficient than it would ever be in the U.S.
However, the political whopper of a problem with Professor Crawford touting Korea as an example of a country that she thinks has got it right on broadband policy, is that Korea does not believe in net neutrality -- Professor Crawford’s pet issue.
Listen to what the Chairman of Korea’s primary telecom/broadband provider, KT Corp’s Lee Suk-chae, recently explained to the WSJ about the Korean broadband model. “We should be able to use the broadband capability in many ways, for example providing all those users a certain marketplace and claim some revenue share. Also we can create virtual goods that can be traded and consumed over the broadband network, such as music services or learning services.” This is exactly the broadband two-sided market that Professor Crawford and her net neutrality proponent allies have long said is the opposite of the network neutrality principle, the supposed First Amendment of the Internet. Ironically for Professor Crawford, Korea has gone in a non-neutral direction to make its ultra-fast, lower-priced, broadband economic model work.
Another big problem with Professor Crawford touting Korea as an example for the U.S. to emulate on broadband policy is that a key theme of Professor Crawford’s book Captive Audience, is railing against excess concentration in the marketplace. For example, Samsung, one of the world’s biggest vertically-integrated conglomerates, reportedly represents 20% of Korea’s $1.1 trillion dollar economy, and is a third larger than the Korea Government’s 15% share of the Korean economy. In stark contrast, Comcast, Professor Crawford’s market-concentration-bogey-man-of-choice in her book Captive Audience, represents only .004% of the American economy or 5,000 times less market concentration than Samsung in Korea.
It seems odd and incongruous for Professor Crawford to keep touting the merits of the Korean model when Korea rejects two of her pillar policy prescriptions: net neutrality and no market concentration.
In sum, Professor Crawford’s entire regulatory thesis depends on a very selective use of facts -- that crumble upon “public” scrutiny.