Italian Broadband Lesson

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The New York Sun

NAPLES, Italy – The influence of America is easy to see here, with our images emblazoned on T-shirts, our music blaring from radios, and our movies advertised on billboards. How poignant it is, therefore, to see a respected American columnist proclaim that America is afflicted by a government “doing a very poor job of preparing the country” for greater economic development.


Last week, Thomas Friedman’s New York Times column diagnosed our malady not merely as a shortage of high-speed broadband Internet service to American homes, but a lack of a government policy to promote it. Mr. Friedman quotes an article in the current issue of Foreign Affairs by Thomas Bleha asserting that we are “the only industrialized state without an explicit national policy for promoting broadband.”


Would that Messrs. Friedman and Bleha were correct.


They need only have checked the Web site of the National Telecommunications and Information Administration at the U.S. Department of Commerce to find President Bush’s speeches on broadband policy. The president has declared a goal of achieving universal broadband availability in America in the next few years.


Of course, that goal was met almost as soon as President Bush took office, entirely as the result of private initiatives. Other than a telecommunications legal structure that all too frequently loses in court, America has no legal barrier to anyone wanting to build additional broadband networks of any speed imaginable.


According to Messrs. Friedman and Bleha, Japan, not America, has held the “Internet leadership baton” for the past few years. Messrs. Friedman and Bleha applaud Japanese industrial policy initiatives that have resulted in higher broadband residential access. But industrial policies have side effects; Japan’s economy has stagnated in recent years.


Most economists would agree that of the many factors affecting economic growth, broadband access to residences is a minor consideration at best. Most Internet innovation and technological advances are generated in universities, laboratories, and offices rather than at home.


While our dominance in Internet services and technology is not what it once was, we still account for more than our fair share of electronic commerce and Internet activity. American businesses, if not our residents, make as much use of broadband as anyone. And because the Internet recognizes few national boundaries, it is American businesses that disproportionately benefit when the Internet is used anywhere in the world.


Of course, many new services can and will be developed with wider residential adoption of broadband. But that will come when rational businesses make investments based on market conditions, not government industrial policies.


International data, if they are to believed, show little association between broadband residential penetration and economic growth. Indeed, the world’s fastest-growing economies – China, Turkey, India, Russia, Malaysia, Pakistan, and others – have lower residential broadband penetration rates than America.


Countries with supposedly higher residential broadband penetration, mostly in Western Europe, tend to have lower economic growth than America. South Korea is the one exception, with both higher broadband penetration and higher economic growth. Broadband industrial policy may be a cure in search of a disease, but the disease is not slow economic growth.


There is a cure for American economic hypochondriacs: a brief visit to Italy. Internet cafes abound because many residences and hotels have no Internet access, much less broadband.


But don’t pity the Italians. The standard of living in Italy is high. No doubt, official statistics, which indicate high unemployment and slow-growing income, understate the real economy.


Much of Italy appears to operate in an unmeasured economy, one where employment is unrecorded, where transactions are cash only, where credit card machines are conveniently broken. These are not the symptoms of a weak economy but of a people cleverer than their tax-collecting government.


No doubt Italy, like every other major country, has a national broadband policy. Unlike Messrs. Friedman and Bleha, few Italians appear to take seriously such a policy as the likely source of widespread dissemination of a new technology. It will come as the result of market conditions, independent of government efforts. That is a lesson that we Americans can learn from Italy.



A former FCC commissioner,Mr. Furchtgott-Roth is president of Furchtgott-Roth Economic Enterprises. He can be reached at hfr@furchtgott-roth.com.


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