Krugman On the Connectivity Power Shift

In today's NYTimes (registration required), Paul Krugman's op-ed piece lays out in simple terms the statistical power shift in the online economy among Europe, Japan, and the US. This shift has been discussed here for some time, but it's good to see it coming to the attention of a wider audience. Quoting: "As recently as 2001, the percentage of the population with high-speed access in Japan and Germany was only half that in the United States. In France it was less than a quarter. By the end of 2006, however, all three countries had more broadband subscribers per 100 people than we did... [W]hen the Bush administration put Michael Powell in charge of the FCC, the digital robber barons were basically set free to do whatever they liked. As a result, there's little competition in U.S. broadband — if you're lucky, you have a choice between the services offered by the local cable monopoly and the local phone monopoly. The price is high and the service is poor, but there's nowhere else to go."

Comments

well,

[edlinfan]

The price is high and the service is poor, but there's nowhere else to go.

How about Europe or Japan?

Re:well,

[Vicissidude]

...we would vote with the wallet if we could. The article implies that one cannot go to another vendor because there is an oligopoly like in other industries. That's typical to US. Not a real competitive market but one that "seems" to be competitive from 10000 feet. Get a clue.

Exactly. Libertarians will hate this idea, but the free market can not fix everything. That is because the free market has a weakness: monopolies. Over time, companies purchase and consume one another until one, dominant entity takes over a section of the market. Copyright, patent, and trademark law protect the monopoly and prevent competitors from establishing themselves. At that point, all innovation stops. The evidence is out there in industry after industry from telephones to software.

And again, libertarians will hate this, but the government must step in for cases like this. The government needs to shake these companies up and break up their monopolies. Only once we get some actual competition will we get good service.

Re:well,

[BoberFett]

Copyright, patent, and trademark law protect the monopoly and prevent competitors from establishing themselves.

The government needs to shake these companies up and break up their monopolies.

So you need government to prevent what government created, and you think libertarians are confused?

Re:well,

[SnapShot]

That's actually pretty insightful in a bumper-sticker kind of way. I think the hidden truth, however, is that the tools that help protect the struggling technology and the inventive individual can be abused. Or, to rephrase it, a foolish consistency is the hobgoblin of little minds.

The copyright that protects a musician should not, also, be used to allow the RIAA to dictate technology policy throughout the U.S.. In the same way, specific patents that protect the start up biomedical company are good while overly broad, obvious patents in the hands of huge companies should not be used to bury competitors under a mountain of lawsuits.

Re:well,

[GnuDiff]

Down here (Latvia, East Europe), it has been a boost in the past couple years. In major towns you can typically get access to 10Mbit+ Ethernet for around $20/month - there are plenty of tiny ISPs who lease access to fiberoptic lines or radiolinks from the couple of major carriers and then get their area connected one by one.

In the rest of the country where you aren't so lucky, you can for the most part get access to 512k to 2Mbit DSL by the local telco, which strangely enough seems to work better now than before. The coverage isn't full, but it is improving. If everything else fails, you should be able to get access nearly everywhere in the country via GPRS, EDGE(up to 236Kbps) or HSDPA(3,6Mbps) if you've got the mobile.

The concept of "foreign" traffic (ie. accessing anything outside your country), which you had to pay for by megabyte trasferred, is now almost completely gone.

All in all, major steps in getting connected and getting broadband, all in the past 2 years or so.

Re:well,

[aplusjimages]

I voted with my wallet. I canceled all my services from broadband to phone service. I had to write a letter to Slashdot and the editors there are posting this for me. Thanks in advance.

Re:well,

[Yfrwlf]

In other words: The government created the mechanism, they don't create the monopolies.

I'm pretty sure the previous poster didn't think the government went out and manually created monopolies, but simply provided the mechanisms. It's many of the laws that the government has created to give benefits to monopolies with lots of control and money, reducing the chance for competition. If you got rid of all government regulation of businesses, you'd help competition in some ways, but monopolies may more easily exist in other ways. At the very least, you'd probably have to have watchdog groups of some sort fill in the gap.

The real question is, does anyone really know what would happen in a completely free market? Would the government still have to step in to try to discourage cooperation between companies and other monopolistic practices, or is such cooperation completely inherent in the system and very difficult to prevent?

When us young capitalists were taught in the classroom about how communism meant no choice, and capitalism meant lots of choice, we were also taught that competition between companies was the reason. But, what happens when companies put down their swords, and realize that cooperating is much more beneficial than competition? Perhaps competition is an old theory back in the days when business owners had too much testosterone that, now days, no longer applies.

On the other, we also see them putting pressure on the OEMs not to bundle any software but their own with new computers.

I'm still amazed how this practice isn't being banned by the U.S. government. The E.U. has some sense to block similar practices in support of consumers, but of course here in the U.S. we apparently love our monopolistic practices. Contract agreements like these are extremely common here, the consumers all get fucked over, and no one seems to care, or realize the goods and prices they *could* be getting, simply because they can't see them in front of their noses.

Re:well,

[spun]

There are two kinds of monopolies, artificial and natural. Artificial monopolies exist due to government regulation backed up by the threat of force, or by collusion between ostensible competitors. Natural monopolies exist where two or more competing firms in an industry would be less efficient than one. Like roads, electricity, or piped water. Who wants to be the second guy to lay water pipes in a suburb?

In libertarian theory, there is a cap on these monopolies ability to overprice goods. People will start finding alternatives if the price gets too high. And collusion between companies simply allows another company to enter the market and undercut the entrenched players.

In reality, there is still inefficiency when monopolies exist. The monopoly could be happy selling for much less, instead, they are taking nearly all the extra value created in the trade. This is not in the best interests of the largest number of people. Collusion is possible due to economic coercion. Not all force comes from a gun, entrenched players can buy up all supplies, or agree to all undercut a competitor until they are out of business. Or they can bribe a competitor to join their oligopoly.

The real question

[Todds523]

I wish I could read the article but I would think that if Google's wireless spectrum bid could possibly even the playing field.

Re:The real question

[Anonymous Coward]

Here you go, enjoy. And enjoy the coming take-down notice, /.!

---

There was a time when everyone thought that the Europeans and the Japanese were better at business than we were. In the early 1990s airport bookstores were full of volumes with samurai warriors on their covers, promising to teach you the secrets of Japanese business success. Lester Thurow's 1992 book, ''Head to Head: The Coming Economic Battle Among Japan, Europe and America,'' which spent more than six months on the Times best-seller list, predicted that Europe would win.

Then it all changed, and American despondency turned into triumphalism. Partly this was because the Clinton boom contrasted so sharply with Europe's slow growth and Japan's decade-long slump. Above all, however, our new confidence reflected the rise of the Internet. Jacques Chirac complained that the Internet was an ''Anglo-Saxon network,'' and he had a point -- France, like most of Europe except Scandinavia, lagged far behind the U.S. when it came to getting online.

What most Americans probably don't know is that over the last few years the situation has totally reversed. As the Internet has evolved -- in particular, as dial-up has given way to broadband connections using DSL, cable and other high-speed links -- it's the United States that has fallen behind.

The numbers are startling. As recently as 2001, the percentage of the population with high-speed access in Japan and Germany was only half that in the United States. In France it was less than a quarter. By the end of 2006, however, all three countries had more broadband subscribers per 100 people than we did.

Even more striking is the fact that our ''high speed'' connections are painfully slow by other countries' standards. According to the Information Technology and Innovation Foundation, French broadband connections are, on average, more than three times as fast as ours. Japanese connections are a dozen times faster. Oh, and access is much cheaper in both countries than it is here.

As a result, we're lagging in new applications of the Internet that depend on high speed. France leads the world in the number of subscribers to Internet TV; the United States isn't even in the top 10.

What happened to America's Internet lead? Bad policy. Specifically, the United States made the same mistake in Internet policy that California made in energy policy: it forgot -- or was persuaded by special interests to ignore -- the reality that sometimes you can't have effective market competition without effective regulation.

You see, the world may look flat once you're in cyberspace -- but to get there you need to go through a narrow passageway, down your phone line or down your TV cable. And if the companies controlling these passageways can behave like the robber barons of yore, levying whatever tolls they like on those who pass by, commerce suffers.

America's Internet flourished in the dial-up era because federal regulators didn't let that happen -- they forced local phone companies to act as common carriers, allowing competing service providers to use their lines. Clinton administration officials, including Al Gore and Reed Hundt, the chairman of the Federal Communications Commission, tried to ensure that this open competition would continue -- but the telecommunications giants sabotaged their efforts, while The Wall Street Journal's editorial page ridiculed them as people with the minds of French bureaucrats.

And when the Bush administration put Michael Powell in charge of the F.C.C., the digital robber barons were basically set free to do whatever they liked. As a result, there's little competition in U.S. broadband -- if you're lucky, you have a choice between the services offered by the local cable monopoly and the local phone monopoly. The price is high and the service is poor, but there's nowhere else to go.

Meanwhile, as a recent article in Business Week explains, the real French bureaucrats used judicious regulation to promote competiti

Another problem...

[amccaf1]

Another problem is that the population of the United States is much more stretched out than in those other countries (especially, duh, Japan) and therefore harder to physically reach. It's easy to reach the 50% of the population nearest the population centers, harder to reach the 50% that's farther away.

It's like the problem we had in the US of upgrading television stations to Hi-Def. In Europe, you only have to upgrade two or three transmitters per country. In the US you have hundreds of transmitters dotted throughout the country (not to mention the added trickiness of local ownership of individual local television stations)...

Re:Another problem...

[Lemmy Caution]

The question is whether these statistics play out within concentrated geographic areas. What about the state of California, or of New York, or of Massachusetts or Washington?

At times, I wonder if the "spread out America" card gets played a bit too much. Most Americans live in fairly concentrated regions. How much of the difference between US, European and Japanese broadband adoption is really about density?

Re:Another problem...

[whiteknight31]

Manhattan has 1.5 million people living in 20 square miles. There are over 25 million people living in the extended metro area of NYC. The bay area has another huge concentration of people. Why does service in these regions suck just as much?

Re:Another problem...

[amccaf1]

Interesting point, so I pulled a few numbers off of wikipedia...

In the entire 50 states of the US, the population density is: 31 per square kilometer (172nd in the world).
California is 83.85 per square kilometer.
New York (state) is 155.18 per square kilometer.
Massachusetts is 312.68 per square kilometer.
Washington State is 34.20 per square kilometer.
By contrast, Montana is 2.39 per square kilometer.

Japan is 337/km per square kilometer.
Germany is 230.9/km per square kilometer.

What I can't find quickly (and what would be useful) would be to see what percentage of Americans live in or near cities versus their European counterparts. I can't say for certain, but my guess based on the above would be that the number would be significantly less in the United States...

http://en.wikipedia.org/wiki/List_of_countries_by_ population_density

Re:Another problem...

[orangepeel]

I wondered about that too. To make a guess about the answer, I had to find some maps showing US population density. Here's one (in PDF format) from the US government (I wish it had the year). Here's one from a .edu for 1990 levels. And here's one from Time magazine done in a unique fashion.

At first I thought this easily backed up my suspicion that, as you put it, the "spread out America" excuse doesn't work so well.

But then I checked out a global map of population distribution and now, after all this effort, I'm firmly back in the "not sure" category. Bring up the full-size map and compare Europe and Japan with the USA. Perhaps for New York, New Jersey, much of Florida and California there's not much excuse. Anywhere else in the USA and it's not so clear to me.

Re:Another problem...

[Anonymous Coward]

It's easy to reach the 50% of the population nearest the population centers, harder to reach the 50% that's farther away.

You clearly neither work in telecom, nor have you spent much time in the country, because you got it completely ass backwards. Dense population centers are the hardest, because of the politics, the coordination with all the other infrastructure (you don't just start methodically shutting down roads in cities on a whim), there are few clear lines of sight, etc. Out in the country, you can see for miles, the legal system is far less complicated, etc. That doesn't mean that there aren't hilly backwoods that are hard to get to; but there are vast swaths of the country with few impediments to high speed access. And they have it - fiber to the home carrying all your phone, cable, and internet. Does Boston? Does NYC? No and no.

Re:Another problem...

[shark swooner]

Except Canada, Sweden, Norway, Finland have much lower population density yet beat us handily in broadband penetration...

Re:Another problem...

[fermion]

This is used as an excuse, and in some parts it is a valid concen, but it is not the only problem. For instance,in my area there are around 3500 people per square mile. Yet DSL is not available in all areas. This means that cable has a monopoly on broadband. Even in areas where DSL is available, the quality is nowhere near what I got back in the late 90's. I suppose part of this is due to increased demand, but a lot of it is due to failing infrastructure. The Bells managed to get back an effective monpoloy on broad band over phones lines, and then made it practically unusable.

And this is the final kicker. AT&T is putting fiber in our area, but first in the neighborhoods that already have DSL. They are going to let the cable company continue to have a monopoly in the other areas. To make matters worse, AT&T will not sell you just internet access. You have to buy a package.

I tell you what our president has done. He has reduced America to third world status. INstead of being able to pay a private company to give you good access to the internet, you have pay a monopoly. And you can't pay for what you need, you have to pay for what they want you to have. BTW, this is not a new revelation. Foreign affairs did an write on this a few years back. We did not just all of the sudden lose our edge. It was a predictable part of policy,and has been obvious since before out president got reelected.

Re:Another problem...

[uradu]

I looked up those figures recently from the last census, and while I don't have links right now, around 77% of the US population lives within what is termed metropolitan areas. While the definition of a metro area differs between countries, it is sufficiently similar to distinguish between inhabitants of extended conurbations versus those living out in Shitsville. The trend line looked like the 80% mark would be reached by the end of the decade. So basically around 80% of the US population lives in very similar density conditions as Europe or Japan. This means that the old argument that the US has crappy services because of the vast distances involved is getting old and tired. Within an urban area the cost of providing service is roughly the same across countries. Backbones between major metro areas are either serviced via line-of-sight wireless (e.g. microwave), or more recently fiber. Because of the massive bandwidth and shared access of the backbone it gets amortized fairly quickly and shouldn't contribute significantly to the overall cost of providing service. The real cost is the last mile stretch, and there the US doesn't have a major disadvantage anymore.

Re:Another problem...

[scoove]

This crap will never change as long as we have fools on both sides of politics that readily believe the only one party has been corrupted by money, special interest and the protection of elite, old money families. Neither party has a monopoly on the corruption of power.

I tell you what our president has done. He has reduced America to third world status.

Anyone who's spent time in third-world nations knows the falsehood of this ignorant commentary. Let's objectively criticize people for what they really have done - as Bush, Reid and Pelosi have no shortage of legitimate criticisms. Our President (and his Congressional counterparts) has exclusively represented the powerful special interests that put him in office in a manner no different than Clinton, Lyndon Johnson (Halliburton's Man, who's wife was a major shareholder of Halliburton until her recent death), FDR, Harry Truman, Nixon, and numerous others. Actually, you'd be hard pressed to find any President who didn't represent elites.

Regarding broadband and the U.S. Federal Government, the Ag bill passed by Congress ~2002/2003 set aside record funds for rural broadband. Senator Harkin (D) of our state was instrumental in its passage, and also instrumental in having the actual rules written to exclusively benefit the incumbent fat-cat monopoly local telcos. Competitors to these tired old local monopolies were written out in the details. This wasn't BushHitlerCo, this was Democrats in Congress along with a Republican administration.

Having worked for a competitor to the incumbents, covering 10 counties, we found funds dried up while tired old ILECs got tens of millions only to sit on the money. Worse yet, permissions for formerly illegal cross-subsidies were enacted, allowing monopolies like Iowa Telecom to apply $3.50 charges to every phone line and dump it into their broadband entity, driving competition out of the market. They kicked competition off of the copper, subsidized from their monopoly business and used monopoly subsidized operations and infrastructure to lower the cost of their broadband business and killed off any real threat. Both Democrats and Republicans were implicit in this gift to their fat-cat buddies.

the Bush administration put Michael Powell in charge of the FCC, the digital robber barons were basically set free to do whatever they liked.

Except the Clinton FCC already set the pace for special deals with incumbents and as mentioned, numerous persons of both parties made sure only their fat cat buddies would get new slush funds.

Read up on the infamous Representative from Bell South, Billy Tauzin, and his efforts with powerful Democratic Senator Dingell to further reinforce monopoly power in broadband. Tauzin was a Republican and Dingell a Democrat. Both are bought and paid for by the incumbents.

As long as we have fools who believe one side is good and the other evil, we'll have a government exclusively representing fat-cat special interests while us fools get screwed. Get your head out of the sand if you don't like being screwed.

Re:Another problem...

[TapeCutter]

"At times, I wonder if the "spread out America" card gets played a bit too much."

The US has ~31 people per sq km, Australia is 1/100th the density with ~0.3 people per sq km, yet 97% of the population have a choice of service providers. The reason for this is that the copper network owners are required by law to lease their lines to competitors at "wholesale" prices, the leasing rules are a similar concept to what google is proposing for the spectrum auction.

Re:Another problem...

[JanneM]

California is 83.85 per square kilometer.
New York (state) is 155.18 per square kilometer.
Massachusetts is 312.68 per square kilometer.
Washington State is 34.20 per square kilometer.
By contrast, Montana is 2.39 per square kilometer. Sweden has 20.0
Finland has 15.5

Countries which tend to rank among the highest in this regard. If California has four times the population density as well as a much larger population in absolute numbers, I don't really see how this would be a factor against the infrastructure.

Re:Another problem...

[jez9999]

And, may I draw your attention to the fact that Finland has (IMHO) the best form of government in the world - open list proportional representation. It has a unicameral parliament, meaning they don't need a second 'checking' chamber because the people are able to hold the first one to account properly.

Reform your electoral systems, people! PR is the way!!!

Re:Another problem...

[Ogemaniac]

But most Fins and Swedes live in concentrated areas, much more so that in the US. Population density very deceptive in this regard. It is not how many people you have per square mile, but rather this average distance to your nearest neighbor. These can lead to quite different conclusions.

Re:Another problem...

[Scudsucker]

Or, to quote Michael Moore, of all people ...

Why "of all people?"

You know we're in serious trouble wheh Michael Moore sounds (at least on this one occasion) like a beacon of reason ...

His hit to miss ratio is better than the mass market media's and VASTLY better than the right wing's.

Re:Another problem...

[Eivind]

No. Not true. Sweden is only *sligthly* more urbanized than USA (81% versus 77%) and Norway, for example, is actually *less* urbanized than USA at 74%. Urbanization explains something, for some countries. But not the difference between USA and the Nordic countries. (which have similar urbanization, and *lower* population-density)

Re:Another problem...

[Kevin Stevens]

I just moved from Manhattan, in Battery Park City, which did not exist 30 years ago. I was about a half mile from the old AT&T headquarters, and a large scary skyscraper they own with no windows that is allegedly filled with all of their telecom equipment, as well as being a mere 5 blocks from Wall St and the heart of the financial district. I don't know how many people live in Battery Park City, but my building had about 500 residents alone, and I was surrounded by highrises.

I now live across the river in Jersey City, which pretty much existed entirely of abandoned factories and docks in 1990. They started building a city here from the ground up in the mid-late 90's, and the process continues today, with high rise apartment and offices building popping up like weeds.

I only had and have 10 down 1 up broadband for $40. Where is my 100MB Connection?!

By these arguments (age of infrastructure, population density, "last mile difficulty") I should have 10 GBPS for about 5 cents a month, but I have the same bandwidth as just about everyone else.

These arguments just don't hold up.

Re:Another problem...

[PrebleNY]

quickly stripped of his committee assignments? he has been serving on the U.S. House Small Business Committee until last month, when he announced "he will take a temporary leave from his position" (full press release from June 5th, 2007 on his website at http://www.house.gov/apps/list/press/la02_jefferso n/pr_070605.html) I have no love for former representative DeLay, and am glad that voters saw fit not to reelect him to the House, I only wish the people of Louisiana had sent Rep Jefferson packing as well

Re:Another problem...

[abertoll]

That's only a problem if you're looking at as if an entire country has to be priced the same. So sure, the US is a bigger country. But some areas of the US are just as densely populated as parts of Europe. So why don't certain states, for example, enjoy a $20 per month high speed internet charge?

It could be worse

[Dan B.]

I live in a building where the developers contracted in a "triple-play" provider. Phone, internet and television are all provided by the one company, and poorly at that. We have zero competition to choose from, and only last week at the body corporate meeting did we (the resident owners who bothered to turn up) manage to reach an agreement that the monopoly situation was of no benefit to the residents nor the owners.

Re:It could be worse

[seanadams.com]

only last week at the body corporate meeting did we (the resident owners who bothered to turn up) manage to reach an agreement that the monopoly situation was of no benefit to the residents nor the owners.

Right! This calls for immediate discussion!

Yeah.

What?!

Immediate.

Right.

New motion?

Completely new motion, eh, that, ah-- that there be, ah, immediate action--

Ah, once the vote has been taken.

Well, obviously once the vote's been taken. You can't act another resolution till you've voted on it...

Triple Play for EUR 30

[langelgjm]

I was in France last year for a few months, and I believe there were triple-play services (Internet, Phone, and TV) being offered for around EUR 30 / month. Internet telephony is a pretty common offering there; there are lots of land-line plans you can get that offer unlimited calling to certain overseas regions (North America, for example) using it.

Re:Krugman's a fruit

[gweihir]

The US lags because we set up our telcom infrastructure the first, and thus have the most primitive last-mile connections.

Well, I don't know how old US phone lines are, but the house connection box of my parents read "Reichspost", i.e. the line was established something like 60 years ago.

Re:Really?

[ScrewMaster]

Knowledgeable masses are scary to politicians of any stripe. Period. Liberals are just as afraid of an educated, emancipated population as the conservatives, and for the same reason: it's harder to get elected/re-elected on a platform of unadulterated bullshit when the people have the mental tools to see right through you. Twisted statistics don't work well on people who can handle numbers, for one, and citizens with a broad knowledge of world history don't get taken in as easily either.

Local Cable Monopolies Exist... Not National.

[Black-Man]

Sheesh... cable "monopolies" exist on the local level. Local municipalities in a lot of states make exclusive arrangements with the cable providers. Recently, Indiana and Michigan struck down the local cable company arrangements allowing competition at the state level. Ohio has recently passed legislation, too. For too long competition meant, the cable provider vs. DSL. Hopefully real competition comes down from this legislation. Maybe someone from Michigan or Indiana could comment??

Re:Local Cable Monopolies Exist... Not National.

[stinerman]

There will never be real competition because it is usually only profitable for one company to service a municipality at a time. If another did move in and they shared the customers one would go under. I know for a fact cities in Ohio are not allowed to exclude any competitors, and that was before this legislation was passed (do you have a link?). If any company wants to offer cable, they must negotiate the terms with the local government in order to use their rights-of-way. In light of that, guess how many cities have more than one cable company serving them. AFAIK, none.

People used to complain to my peers and me on the cable advisory board that we shouldn't be giving Time Warner a monopoly over cable service. We showed them the laws on the subject. Anyone is free to offer cable service, it's just that no one wants to once there is an established player in town.

Re:That's a subscriber-only feature!

[Anonymous Coward]

I actually pay for this shit, so I may as well do something with it. Enjoy.

There was a time when everyone thought that the Europeans and the Japanese were better at business than we were. In the early 1990s airport bookstores were full of volumes with samurai warriors on their covers, promising to teach you the secrets of Japanese business success. Lester Thurow's 1992 book, "Head to Head: The Coming Economic Battle Among Japan, Europe and America," which spent more than six months on the Times best-seller list, predicted that Europe would win.

Then it all changed, and American despondency turned into triumphalism. Partly this was because the Clinton boom contrasted so sharply with Europe's slow growth and Japan's decade-long slump. Above all, however, our new confidence reflected the rise of the Internet. Jacques Chirac complained that the Internet was an "Anglo-Saxon network," and he had a point -- France, like most of Europe except Scandinavia, lagged far behind the U.S. when it came to getting online.

What most Americans probably don't know is that over the last few years the situation has totally reversed. As the Internet has evolved -- in particular, as dial-up has given way to broadband connections using DSL, cable and other high-speed links -- it's the United States that has fallen behind.

The numbers are startling. As recently as 2001, the percentage of the population with high-speed access in Japan and Germany was only half that in the United States. In France it was less than a quarter. By the end of 2006, however, all three countries had more broadband subscribers per 100 people than we did.

Even more striking is the fact that our "high speed" connections are painfully slow by other countries' standards. According to the Information Technology and Innovation Foundation, French broadband connections are, on average, more than three times as fast as ours. Japanese connections are a dozen times faster. Oh, and access is much cheaper in both countries than it is here.

As a result, we're lagging in new applications of the Internet that depend on high speed. France leads the world in the number of subscribers to Internet TV; the United States isn't even in the top 10.

What happened to America's Internet lead? Bad policy. Specifically, the United States made the same mistake in Internet policy that California made in energy policy: it forgot -- or was persuaded by special interests to ignore -- the reality that sometimes you can't have effective market competition without effective regulation.

You see, the world may look flat once you're in cyberspace -- but to get there you need to go through a narrow passageway, down your phone line or down your TV cable. And if the companies controlling these passageways can behave like the robber barons of yore, levying whatever tolls they like on those who pass by, commerce suffers.

America's Internet flourished in the dial-up era because federal regulators didn't let that happen -- they forced local phone companies to act as common carriers, allowing competing service providers to use their lines. Clinton administration officials, including Al Gore and Reed Hundt, the chairman of the Federal Communications Commission, tried to ensure that this open competition would continue -- but the telecommunications giants sabotaged their efforts, while The Wall Street Journal's editorial page ridiculed them as people with the minds of French bureaucrats.

And when the Bush administration put Michael Powell in charge of the F.C.C., the digital robber barons were basically set free to do whatever they liked. As a result, there's little competition in U.S. broadband -- if you're lucky, you have a choice between the services offered by the local cable monopoly and the local phone monopoly. The price is high and the service is poor, but there's nowhere else to go.

Meanwhile, as a recent article in Business Week explains, the real French bureaucrats used judicious regulation to promote competition. As a r

Re:Comparing US to other countries

[Swampash]

Germany broadband to New York, or France to California.

So why is Germany's broadband access so much better than New York's? Why is France's broadband so much better than California's?

Not this old lame excuse again

[symbolset]

Every time somebody trots out this lame excuse I will persist in pointing out that in bucolic Ephrata, Washinton - the middle of nowhere on the road to nowhere - they have gigabit broadband. That's fiber to the premises and gigabit Ethernet to the house, a symmetrical unmetered gigabit link to each subscriber, for less than I pay to Comcast each month.

They get it through their power company and they're grandfathered in but I can't get that deal because the big players bought legislation prohibiting municipal broadband.

So stop already with the story that the last mile is expensive, bandwidth is costly, density is the key lies already. It's about the incumbent monopolies maintaining their profits at the cost of depriving the average citizen of necessary infrastructure full stop.

Re:Not this old lame excuse again

[nelsonal]

Of course, it was all paid for by the manipulations that Enron was creating in California. Grant County sits on one side of the Columbia River which has more hydro dams than any other river. Most of the dams are owned by non-profit co-ops, that have sold power to California for years. When power prices went nuts in the summer of 2001, the co-op was minting money. So they had to plow that money into something, so they started stringing up fiber everywhere in the county. Sweet deal for the residents of Grant County though.

Since the measurement was taken as subscriptions per 100 people, I am curious if there are differences in household size between the US and other nations that could skew the results.

Re:Krugman's a fruit

[Fallen Kell]

What a load of bull. Just because we started rolling out the technology first doesn't mean a single thing at all as to whether we continue rolling out an "older" technology to areas that do not have ANYTHING in them at all. That decision was made by the same people who are in control of the networks as to if they would spend more to use more up-to-date technology or to use the cheaper more readily available technology. Also do not forget that Japan has not been far behind us from the beginning in terms of rolling out the technology, however, they have been actively ripping out the older stuff and upgrading to the new stuff all the time, unlike our infrastructure which will only "upgrade" when something fails and they realize they can't purchase the same piece of equipment anymore to replace it. Verizon is the only one over here that seems to actually be upgrading their infrastructure, however, they also lock the customer out of any kind of competition for the privilege of using their new service (i.e. they remove the copper land lines to your house, which you will then have to pay to have put back in if you want to switch phone services in the future, even though it costs Verizon time and money to remove the old line, they are using that as a way to deter people from going to a competitor, by making the customer spend upwards of $200-400 in line fees, which is enough to keep the customer from deciding to go to a competitor who would save them an extra $5-$10 a month... and thus allow Verizon to over-charge by that much more because it will cost the customer more to go to another competitor in up-front costs then it would be worth the savings). Again, anti-competitive lock-ins.

The US lags behind because the FCC allows the big industry to do what they want. Heck, we are almost completely back to AT&T and ONLY AT&T in terms of telephone service. The 1982 split that was a part of a lawsuit settlement from the government against AT&T was what allowed AT&T to get into the internet business in the first place. AT&T agreed to split into 7 new companies (plus AT&T), and would be allowed to start developing data network services which is what led to access to the internet for normal businesses and then people at their homes. SBC was formed from Ameritech, Southwest Bell, and Pacific Telesis. SBC then aquirred AT&T itself and BellSouth, and renamed themselves back to AT&T (as that had the more important name, since it had been around since 1883 and was the ORIGINAL telephone company of all telephone companies). So of the 8 companies that AT&T was split into, 5 of them have been merged back together. The other 3 are now down to just two, Verizon and QWest. So in the landmark 1982 settlement that allowed the phone company (AT&T) to get into the internet service business, they are now just three. The Supreme Court settled with AT&T with the stipulation that it was going to be 8 companies that controlled the infrastructure. There was a reason for that because there would be enough companies out there that it would be difficult for them to all collude together and over-charge the customers, because someone would always say, "We can make more net money by cutting our profit margin down lower then the other companies and taking a large portion of their customers". Whereas now, with only three companies, it is easy for them to say, "We can make a LOT more money by steadily increasing the fees and rates we charge, so long as the other two guys see what we are doing and do the same thing, because it will only benefit them as much as it benefits us".

Re:Krugman's a fruit

[burnin1965]

The US lags because we set up our telcom infrastructure the first, and thus have the most primitive last-mile connections.

That seems like a reasonable arguement but if that were the case then with the massive housing boom we have been in for the past 10 years we should have a significant number of homes with the latest fiber optic last mile technology, but guess what, we dont.

I've watched thousands of houses go up and hundreds of new neighborhoods, and whats going in the ground you ask, the same coax and twisted pair copper they've been using for the past 30+ years.

And when people get fed up and try to band together to build there own fiber optic network because the digital robber barons refuse to invest in the latest technology do we finally get the latest technology, no we get lawyers and lobbying to turn citizens into criminals and outlaws.

And now with our pathetic outdated infrastructure that provides limited broadband at high prices what are the robber barons trying to do, drop their requirements for network neutrality and charge us and content providers even more for what we've already paid for.

Its not distance or age, its plain and simple greed and governmental complicity with illegal monpolization of markets. This country is getting passed by in the name of capitalism for the few and screw the other half.

Contradicting myself again

[symbolset]

Lots of those high rise office buildings have fibre connections. The cities you mention are among some of the prime switching points for the internet. The available bandwidth is obscene.

There are available technologies for getting the bandwidth from where it's switched to the common citizen without negotiating a million rights of way. They are not employed for the reason in my post below: the incumbent monopolies have an unlimited budget to maintain the scarcity - and as such the price - of their product.

Let us not pretend there is some other reason. If you can see that skyscraper on the horizon from your roof, it could hit you with more broadband than you and your million neighbors could use, even if you shared it further out. This is about money and nothing else.

Re:Krugman's a fruit

[uradu]

> The US lags because we set up our telcom infrastructure the first

LOL, what a crock. Besides, you chose the wrong countries to compare to. While some telephone deployments in the US may have been a few years ahead of anyone else, Germany and France were pioneers in the field in their own right and were right up there in rolling out infrastructure. We're talking about technology that's over one hundred years old, a few years here or there would most certainly not explain the current state of affairs.

Besides, I doubt copper rolled out in 1900 is even in use anywhere in the US. My house is in one of the oldest neighborhoods of our town and was built sometime in the mid-1890s. It still was fully piped for gas lighting and also had knob-and-tube wiring throughout when we gutted it. Yet the telephone lines running to it had probably been replaced many times throughout the years, with the latest run not being older than 20 years or so. I think you will find that to be the case for any last-mile runs in the US.

With 50Mbps at Home why have an office?

[TheNarrator]

I have a friend who lives up in California and has a bunch of people working out of his house because his home internet connection is somehow 50mbps per second because the place was setup as some ultra high speed trial a few years back. He'd like to get all his employees out of his living room but he can't because he can't find a single commercial building with comparable broadband speeds without going to an absurdly priced OC3. Just goes to show that as William Gibson has said, "The future is here, it's just not widely distributed yet".

Choice

[Duncan3]

I have plenty of choices. There is the 768k plan, the 1.5Mbit plan, the 3Mbit plan and the 6Mbit plan from AT&T.

Strange definition of "lucky"

[Vecna!]

If you're "lucky", you have a buffet of connection options in the US. You have cable access (in most places that's 1MB or faster) and DSL from a variety of providers (256K and up, often 1MB and faster). In many places you can get residential wireless, with speeds dependent on how many people are sharing an AP. If you live in high-density housing you may have access to fiber, with speeds from 3MB and up. Generally speaking, the cost of this access is less than $100 per month, and may be as little as $50 per month.

A rough estimate would be that 70% or more of the US population is "lucky" by the above definition.

"Broadband" connections in the US are not hard to get, are not prohibitively expensive, and generally work as advertised with little tech support required. The people who are not well served in the US are rural users, and some users in old inner city areas with a poor existing infrastructure. The people with the most technical support issues are those attempting to host servers and other business class services on residential networks, or those using old, outdated, or unsupported combinations of hardware & software; the average user, with an average hardware/software mix for the most part achieves plug & play connectivity. Tech support loads at most ISPs are 1:10 or higher (in other words, less than 10% of the customers need tech support for connectivity issues) and in most cases, tech support problems are traced to user error.

I suspect that the poor adoption rates for broadband in the US have more to do with lack of interest on the part of consumers than with technical availability. Many people don't view the internet as something they need or want - especially the 40+ percent of the US population 50 and older, who grew up without it don't know what they're missing.

Naked truth

[goombah99]

Interesting that Krugman uses France's health care system as a point of comparison. Particularly since the French are beginning to realize they can't afford it any more. Yes a sublime contrast to our employer-pays health care system where we haven't been able to afford it in years, but have not realized it yet.

Look regardless of how much you might dispute the desirability of the French health care system, the analogy he is making is logically correct. That is, the French are not holding themselves prisoner to free-market ideology.

Re:Naked truth

[dhartshorn]

Regardless of whether the French are free of the free market in these areas, the ultimate question is whether the system is successful and sustainable. Apparently, the answer is "not so much". So perhaps it's not accurate to blame the free market for what he perceives as the failures of either system in the US. But then he would have no point, would he?

Re:Krugman's a fruit

[frank_adrian314159]

The subject stands alone.

Krugman is actually quite the economist. His text, "Economics," written by him and Robin Wells is used in many universities in introductory courses (it's the number two text, I believe, after the venerable Samuelson), and his text "International Economics," written by him and Maurice Obstfeld is in it's ninth edition. He's a Professor of Economics and International Affairs at the Woodrow Wilson School at Princeton and has had numerous publications during his career, including 38 books. He also was the winner of the American Economics Association's John Bates Clark Medal in 1991 and is considered one of the country's foremost neo-Keynesian economists. As such, I'm fairly sure he has enough fact checkers at his disposal to make sure that his figures and conceptual grounding is much better than yours. You may not believe him or agree with his politics, but he is certainly not a "fruit".

Simple reason in germany

[Casandro]

The reason why germany got so many broadband connections is rather simple. It's way cheaper to have broadband here than dial-up.

Traditionally you had to pay for every single phonecall, even local ones. So dialing-in into an ISP _really_ cost you a lot of money. In fact back then most ISPs didn't charge you for their services so you only had to pay to your local phone company.
Then with DSL and cable modems you suddenly got a flat-rate for a moderately low price.

Currently the costs are about this: (all in Euro)
dial-up 0.1 cents/minute => 43.2 Euro a month (wow, this suddenly even became affordable)
DSL is about 50 Euros a month including an ISDN phone-line with flat-rate service for data-calls for all of germany.

Dial-up used to be even more expensive, costing as much as 3 cents per minute.

It's possible

[Gazzonyx]

Well, I live in Kutztown, PA. Thanks to the local government having the foresight to install a loop of fiber around this small farm valley town about 5 years ago, I'm posting this on a 10Mbit down, 1Mbit up (it's faster than that... 10 down and 2 up, usually) fiber line that costs me $45/month.

This is proof it's possible if those in charge have foresight, plan well, do it right, and don't give in to the pressure of the industry giants who'll try to stop them. Perhaps we should expect more from our

Re:It's possible

[rolfc]

I live in a small town north of Stockholm, Sweden. Our local government also installed a loop of fiber. Now I have bidirectional 100Mbit for 200 SEK (30$). The provider is a small local company, but there are several alternatives using *sdl

Re:It's possible

[SnapShot]

Thanks a lot. You just made me cry into my morning coffee. Now, why don't you make us all feel really bad and describe all on the 6 foot blond models who hang around your town. Or the universal health care. Or the eight weeks of vacation.

At least we have lots of aircraft carriers.

The difference between countiries

[m_evanchik]

Is anyone really surprised that the French, Germans, Koreans, and Japanese are beating us at downloading copious amounts of porn? Different countries have different priorities. Once the British and French outdid us in useless foreign military adventures, now we have them handily beat in that arena.

It takes all kinds in this crazy world of ours.

city population density

[Anonymous Coward]

I think you wanted to link to this: http://en.wikipedia.org/wiki/List_of_selected_citi es_by_population_density You can compare Tokyo's 13,000/km^2 to New Yorks 10,000/km^2, or Munich's 4,200/km^2 with Los Angele's 3,100/km^2 There really is not a large difference between European, Asian, or North American cities. They just have different monopolies and governments ripping them off.

What Do You Get In The US?

[patio11]

Hideho, American expat in rural Japan here. Its been ages in Internet time since I've paid for a US connection, so lets compare notes:

I get high speed internet through YahooBB (ADSL), which is now run by Softbank. I pay 4200 yen a month (~$34 at present) for 50 MB/s download speed, which is oversold (bounces between 2 MB/s and 12 MB/s when connecting to sites where I could reasonably expect to get the full benefit, such as iTunes Japan or the WoW bittorrent installer). This includes the basic charge for VoIP phone service but no call time (which is cheap -- 3 cents a minute to the US) and equipment rental (the modem -- should have bought it, would have paid for itself around month 18). I also pay approximately 1800 yen for basic telephone service, a necessary prerequisite for ADSL unless you want your VoIP phone to not be reachable by non-VoIP customers ("uh oh"). There is also the issue of buying a lease for a landline, which is a one time charge of $100 but which theoretically has the same resale value so we'll ignore that for the present.

So, all told, about $50 for high speed service which consistently delivers 2 to 12 MB/s.

What does $50 get in the US these days?

Re:What Do You Get In The US?

[BruceHoward]

I'm paying approx. 5000 yen / month for "Hikari Fiber service" -- 100mb fiber to the house, and another 3000 yen for the PPPOE connection with fixed IP to bbexcite.co.jp. Call it USD 65.00 or so. Maybe a little high, but the service is solid, bidirectional throughput is excellent and no apparently filtering or traffic shaping.

I'm told other providers in our neighborhood offer equivalent throughput over copper (usen comes to mind), possibly at a lower price. There's also service available from the local electric utility TEPCO. And of course, lower throughput options like YahooBB are also available.

Having informally checked out each of these options, my impression is that at least in our neck of the Tokyo woods, service is not oversold regardless of which of these options you chose.

Friends back in the states to whom I've described this say I'm in for a rude awakening when we move back.

Re:Krugman's a fruit

[Copid]

I don't know if he's a fruit, but he is well known as a left-wing crank. I suggest if he really thinks this idea has some merit get someone with credibility to front it instead of him. Since all but likewise left-wing cranks write this guy off. (Note: the same goes for right-wing cranks. If Ann Coulter had something to say about technology, and got in some crazy dig about Democrats, I'd say yeah yeah whatever to that too.)

I can't figure this one out. Are you seriously putting a guy who has taught economics at Stanford, Yale, and MIT and worked on the White House Council of Economic Advisers on the same plane as Ann Coulter? Sure, he pisses people off because he has opinions, but you can't seriously be putting his analysis in the same trash bin as somebody who simply says the most outrageous thing she can think of in order to sell books, can you?

Re:Krugman's a fruit

[JohnBailey]

So ignore the messenger and concentrate on the message. Does having broadband services carved up between a limited number of companies make for more competition than making th telecom and cable companies act only as carriers for the same services? And if they are the only ones who can make an economically viable business doing this, are they going to have any real incentive to improve the service and reduce the cost to end users? Its a perfectly valid question, and many will agree with the author's conclusion.

Godwin time!

[Stevecrox]

It was proportion representative government which put Hitler in charge! Its evil I tell you!

Yes and no

[Moraelin]

Well, yes and no.

1. Densities per whole state can be a bit misleading, because the USA has a ton of farmland or just empty space. The communities you need to connect (first) tend to be a bit more concentrated. Even if you take Montana as an example, I'm willing to bet that even the villages there have a bit more than 2.39 people per square kilometer. (Unless they're all hermits.)

By comparison, western Europe simply has less empty space to screw up the maths. For example, North Rhine-Westphalia (the heavily industrialized county in the NW of Germany) is almost one contiguous megalopolis spread across a whole state. Not exactly, but almost. You only know that, say, Düsseldorf (land capital city) ended and Duisburg ('nother city next to it) started only because the shields on the highway say so. There's just not that much empty space to screw up the maths.

2. If population spread was the real problem, then in the USA the major cities should all be on Ethernet, which AFAIK isn't the case. I mean, high population density = good for broadband, right?

Cities are a lot less dense down here in Germany, and while there isn't as much suburb sprawl (for lack of space and a different culture), houses are rarely higher than 3-4 floors (including ground floor) even in a densely populated area like NRW. The NRW has 18 million inhabitants spread over 34,083 square kilometres, which means some 528 people per square kilometre. Of course it's not uniform, but take it as a rough ballpark figure.

Düsseldorf itself ends up at 2681 people per square kilometre, according to Wikipedia, and that's a major German city.

By comparison, New York City packs 8.2 million people within 830 square kilometres, which means around 10,000 people per square kilometre, or about 4 times the density of Düsseldorf, 20 times the density of the NRW or 40 times the density of Germany. They should have some _awesome_ network access then, right? The New York City metropolitan area packs 18.8 million inhabitants in 8680 square kilometres, so the density is around 10 times that of Germany, 4 times that of the NRW and slightly less than Düsseldorf. (But the last one is slightly misleading since it's comparing the whole sprawl including suburbs and satellite towns to just the main city area of Düsseldorf. The comparison to the whole NRW is a lot more accurate.)

3. But that all becomes a lot less relevant when you notice that density doesn't correlate to net access that well in Europe either. E.g.:

A. Actually the best places for net access aren't in such dense industrial areas of Germany, but actually in many rural areas. Somehow the Telekom ended up upgrading the net access to some villages and small-ish towns before the larger and denser cities.

B. Among countries, the best access is in countries like... Sweden. According to the link you posted, it ends up at 20 inhabitants per square kilometre, which is considerably lower than the USA.

Ok, so there the frozen north is mostly empty space, so let's look up Stockholm on Wikipedia. Stockholm itself is pretty packed, at 4,136 people per square kilometre, but then that's still peanuts compared to, say, New York City. If you take it together with its suburbs, i.e., the whole metropolitan area, it's a meager 499 people per square kilometre. Compared to the NYC metropolitan area, it's outright sparse. Some of the suburbs have as low as 80 people per square kilometre.

Basically, to wrap this long rant up, population density doesn't seem to correlate to net access _that_ well. Sure, noone drags optical fibre to some lone hut on the top of a mountain, but you don't need ultra-packed communities to get broadband either. And in between those extremes, the correlation is at best imperfect, and at worst non-existant.

Re:Monopolies will form, regardless.

[BoberFett]

Who modded this nitwit informative? Libertarians most certainly do not believe in a government which can't stop people from blowing up their competitors factories. Those are anarchists, not libertarians. Libertarians fully believe in government that exists to prevent coercion, of which the blowing up factories would fall.

You obviously fail to grasp the ideas behind libertarianism, so you're hardly qualified to criticize them.

Re:Monopolies will form, regardless.

[Attila Dimedici]

Do you know why Standard Oil became a monopoly? It became a monopoly because it was vastly more efficient than its competitors (It found a market for products that its competitors were throwing away). In addition, it lowered the price of its primary products for the consumer. Standard Oil wasn't broken up because the people rose up against it. It was broken up because other businesses rose up against it. On another point, Paul Krugman has a well deserved reputation as being fast and loose with the facts. Just Google "Krugman Watch".

Re:Monopolies will form, regardless.

[cmdr_tofu]

Who modded this nitwit informative?
Anarchists don't blow up factories. Those are nihilists and luddites not anarchists! Anarchists believe in establishing a decentralized structure so that the profits of the factory go to the workers and all decisions are made by consensus!

You fail to grasp the concepts of peace, love and anarchy! So, you are hardly qualified to use them in your comparisons!

Re:Krugman's a fruit

[jdbo]

Krugman is on the receiving end of character assassination because he's stood in opposition to the Bush presidency even when it was popular, based entirely on their policy position. He's been characterized as "shrill" due to his consistency in holding this position. Some would call this intellectual honesty in a pundit, but those who dislike his conclusions can't admit that.

Has he made a few errors? Yes, even a few doozies, which have been corrected, ad nauseum. I do believe that he's more vulnerable to fact-checking based errors because he actually works to base his columns on facts, vs. working through baseless assertion and anecdote - paging David Brooks, Maureen Dowd, and many, many others who pretend to be working in fact but instead focus on rhetoric. These "colleagues" (i.e pundits at the NYT and other top-circulated newspapers) are rarely held to the same standard that he is. It's much easier to "let them off the hook" for far more sweeping assertions because their reflecting CW, and not challenging it.

Re:Monopolies will form, regardless.

[CmdrGravy]

Who modded this nitwit informative ?
Nihilists don't blow up factories ! Those are fiedists, not nihilists. Nihilists simply don't see the point in blowing anything up and believe the workers and owners should simply give it all up since it doesn't matter anyway !

You fail to grasp the utter pointlessness of nihilism so you're hardly qualified to use them in your post.

Re:Monopolies will form, regardless.

[spun]

You don't understand anarchism. Before anyone had coined the term "Libertarian" there were anarchists. All anarchists believe that government exists to prevent coercion. Libertarians are a branch of individualist anarchism, believers in strong property rights. Some anarchists are social anarchists and believe that private real estate is theft. We call it coercion when you fence off land that everyone could use, call it your own, and shoot people for trespass. We call it coercion when you buy up all the land and prevent the landless from growing food for themselves so you can make them work for you.

Libertarians want government. They want a government police force to keep their legally purchased slaves in line, and to keep the desperate starving masses from 'stealing' their land.

Re:Monopolies will form, regardless.

[Attila Dimedici]

Read the Wikipedia article http://en.wikipedia.org/wiki/Standard_Oil "Standard Oil's market position had been established through an emphasis on efficiency and responsibility. While most companies dumped gasoline (this being before the automobile) in rivers, Standard used it to fuel the company's own machines. Where gigantic mountains of heavy waste grew by other companies' refineries, Rockefeller found ways to market and sell these waste products, creating the first synthetic competitor for beeswax, as well as acquiring the company that invented and produced Vaseline, the Chesebrough Manufacturing Company, which was a Standard company only from 1908 until 1911." Yes they also used very aggressive business tactics. Tactics that are certainly unethical and probably appropriately illegal (now, not illegal then). However, I suspect that if the government didn't act either to prop up their monopoly or to bust it that it would have come apart anyway. Monopolies are not a sustainable business model in a free market system without government support. The explanation of why this is so was a five page paper that I am not going to try and reporduce here.