The view from South Korea: Incumbent protectionism hobbles U.S. Internet infrastructure

Now that the Internet is maturing to the point that it's the de facto global telecommunications system, the view of the United States -- the nation that innovated the Internet -- from the outside can be quite unflattering. Other developed nations watch as Americans struggle with high cost, low value service. Or no service at all as is the unfortunate circumstance for some 19 million U.S. homes, according to the U.S. Federal Communications Commission.

Why didn't the U.S. put in place policies and plans decades ago to ensure all American homes and businesses have fiber optic connections to the Internet? How did it lose its way? Sometimes when one is lost, they don't know it until someone else points out to them they're off course or wandering about.

A spokesman for South Korea's SK Broadband, which is preparing to introduce 10Gbps fiber service, provides an answer: protectionism of legacy telephone and cable companies that failed to put in place plans to transition to fiber infrastructure.

“In my travels to the United States, it is very plain they have lost their way in advancing broadband technology,” said Pyon Seo-Ju. “Internet access is terribly slow and expensive because American politicians have sacrificed Americas’s technology leadership to protect conglomerates and allow them to flourish. Although unfortunate for America, this has given Korea a chance to promote our own industry and enhance the success of companies like Samsung that are well-known in the United States today."

South Korea’s gigabit broadband woes should serve as object lesson for FCC regulators | Network World

South Korea’s gigabit broadband woes should serve as object lesson for FCC regulators | Network World: 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.

Chairman Hwang told those assembled that the company faced its first annual deficit in 2013 due to its sales declines in wired broadband, along with almost-flat growth in mobile subscribers. It was the worst time in the company’s history, one that he called a “devastating year of poor performance.” KT even had suspended new customer marketing for 45 days and asked 8,300 employees to voluntarily resign to help the company overcome this crisis.

The real object lesson here is commercial investment in high cost telecommunications infrastructure is fraught with substantial business risk. It's that business risk -- and not the risk of common carrier regulation as some such as this article warn -- that produces market failure that in the United States has left some 19 million homes and small businesses without wireline Internet access according to Federal Communications Commission estimates.