Broadband in America: A Policy of Neglect is Not Benign

Abstract

Under the Bush Administration, the U.S. failed to close the digital divide and fell behind on broadband. In 2001, 54 percent of households did not have the Internet. In late 2007, 49 percent of households did nothave broadband. About 25 percent of households with incomes below $25,000 per year had broadband in 2007; whereas over 80 percent of households with incomes above $75,000 did. In 2001, the U.S. ranked third in the world in the penetration of broadband, but had fallen to 15th by 2007. A variety of measures of performance and econometric models that control for economic and social factors show a dozen nations are ahead of the U.S. The laissez faire policy pursued by the Bush administration let a duopoly of cable and telephone companies dribble out broadband at slow speed and high prices. In contrast, the nations that passed the U.S. implemented much more aggressive policies to promote broadband and instead of relying on weak intermodal competition, they required the dominant networks to be open to competition in Internet services. This kept the price down and stimulated adoption and innovation.