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South Korea's gigabit broadband woes should serve as object lesson for FCC regulators

Stuart N.Brotman | Sept. 25, 2014
The FCC now has collected more than 3 million comments in a major proceeding that may reclassify broadband Internet service to fit within the largely- inflexible common carrier model in Title II of the Communications Act of 1934.

The FCC now has collected more than 3 million comments in a major proceeding that may reclassify broadband Internet service to fit within the largely- inflexible common carrier model in Title II of the Communications Act of 1934.

Under this regime, companies may be required to request government permission in order to enter and exit the market for broadband services, and the FCC would have the authority to enforce price controls that may lead to unnecessary disruption among competitive Internet services.

Is this the regulatory silver bullet for the Internet's growth?  Not according to Progressive Policy Institute Senior Fellow Hal Singer and Brookings Institution Nonresident Senior Fellow Robert Litan. In a recently-released report, these scholars conclude that "[i]mposing public-utility style regulation on Internet access would dampen innovation and investment in more, faster broadband."

Additionally, comparative research shows that a similar form of utility regulation implemented in Europe has brought Internet investment rates down to a dismal $244 per household, compared to $562 in the United States under its current deregulatory model, according a new study by University of Pennsylvania Law School Professor Christopher Yoo.

Despite such analyses, some advocates continue to cite other countries, such as South Korea, as leapfrogging ahead of our nation's broadband network capabilities. A closer look at actual marketplace events there, rather than press reports from afar, reveals that what has transpired is quite different from what others have reported as fact, however.

I had the privilege two summers ago to be the first American professor teaching digital entrepreneurship in South Korea. Since then, I have followed broadband developments there with a much keener sense of knowledge and interest.

One of the first things I learned in Seoul was that the 1Gbps broadband service that many in the U.S. were referencing actually did not exist then, or today. In 2009, with much fanfare, the Korea Communications Commission (KCC) announced that it was working on plans that would enable Koreans to access 1Gbps broadband service by 2012.

Private South Korean firms, notably KT (the former Korea Telecom), SK Telecom and the cable provider CJ Hellovision, became the principal participants in the gigabit project, with the government committing about 5 percent of the total estimated budget.

But by 2011, only a very small-scale 1Gbps pilot project with 1,500 households in five South Korean cities had been launched, all with government funding. None of the private firms could make a case for moving ahead, however, since they had not yet developed a business model to justify the scale of investment that the KCC had said would be necessary.

Three years passed without any indication of progress on the effort, leading many to believe that the plan had hit an impasse. Then in July 2014, Chairman Chang-gyu Hwang of KT, the dominant broadband provider in Korea, representing almost half of the country's total broadband market share, called a press conference — an announcement that I hoped would be an encouraging milestone.

 

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