A civil war and three lucky punches
– probably the reasons why the USA has developed one of the most advanced telecom markets in the world
Some think that tough regulation and many players in the telecommunications market are the only ways to ensure consumer access to advanced telecommunications products and low prices. These people often overlook what technology means for competition.
The USA, a country with 316 million people, has an advanced and robust market for telecommunications. It is not regulation, but a civil war and three lucky punches that created this success. Strand Consult’s new report “10 Myths and Realities of Broadband Internet in the USA” looks at the reasons why the U.S. market has evolved. Just as the U.S. and the Soviet Union had an arms race in the Cold War, American carriers are in are investing in different technologies with the sole purpose of emerging superior to the others.
The United States has the advantage of being a single market with 316 million people. It took a civil war to keep the country together. When one builds and operates a telecommunications company, it is scale that gives economy. The EU with 28 countries is a fragmented market.
Beginning in 1948 the United States started investing in cable TV networks. The decision was not a regulatory one, but rather a practical way to ensure that Americans all across the country had easy access to many TV channels. Unbeknownst at the time, this laid the groundwork so that once the Internet and the DOCSIS technology innovation (DOCSIS) were available, it was possible to deliver broadband via cable TV. A lucky punch – it was not regulation of the cable TV market that made it possible for cable TV operators to provide Internet access to their customers. Technological development is the reason why Americans today can purchase high speed Internet via cable today.
In the beginning of the mobile era, the Americans focused on CDMA while Europeans on GSM. The Americans lost this round of the global standards war. An operator such as Verizon with a large national CDMA network had to admit that the future would be LTE. Phone manufacturers would not develop, market and sell cool CDMA phones anymore. In practical terms, Verizon had just two choices: invest in LTE or die. A lucky punch – if CDMA had been the winner, Verizon would have had access to a wide selection of cool CDMA smartphones and thus reduce their investments in the network. As CDMA turned out to be a dead technology, Verizon had to invest heavily in LTE. This is the reason that the U.S. today has the world’s best LTE coverage and why Verizon’s competitors have invest to keep up. This arms race is the result of technological progress, not regulation.
The fact that cable TV players can sell broadband, that DSL players can sell TV, and that mobile operators can sell LTE, create a robust broadband market. It is carriers fighting fiercely for customers and investing in their networks that drives competition in the United States. A lucky punch – It was not regulation that made it possible for classical telecom operators to go from selling single play to triple play; it was the technological development. In 1948, no one had any clue that cable TV would one day provide broadband or that fixed networks would deliver IPTV or that mobile networks could be used for the commercial internet.
A civil war and three lucky punches, not regulation, are probably the reasons why the USA can claim one of the most advanced telecom markets.
Put simply the United States is a good example of how technological developments have a greater impact on competition than regulatory action. The report “10 Myths and Realities of Broadband Internet in the USA” describes why the USA is an advanced, robust broadband market and why the United States has overtaken the EU in many broadband measures. Americans today have access to some of the best broadband networks including LTE, not because of regulation, but because of scale and technology. To be sure, regulators have a role to play, but they need to take into account how technological developments drive competition.
A new form of technology is already in the works in telecommunications. Competition is created by Over the Top players such as Google, Facebook, Skype, Netflix and Apple. This development has implications for operators’ willingness to invest in network infrastructure. The report “Understanding Net Neutrality and Stakeholders’ Arguments” reviews some of challenges that the telecom industry faces in the coming years.
Read more about this unique report