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The Pandemic That Didn’t Break the Internet

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The Pandemic That Didn’t Break the Internet

Market-friendly policies let Americans stream to their hearts’ content, while regulation-heavy Europe imposes speed limits. May 7, 2020
Covid-19
Technology and Innovation
Infrastructure and energy

Of all the edicts issued during the Covid-19 pandemic, perhaps the least cruel is the request by European Union regulators that Netflix and YouTube stream their videos a bit slower. The reduced data flow helps relieve network congestion. Movie-reception clarity drops, but kids may get faster access to their homework, while doctors practicing telehealth are better able to connect with patients.

The U.S. has not introduced similar policies, though stay-at-home orders saw Internet usage rates surge about one-third—in the U.S. and abroad—by late March. While greater demand for data slows transmission speeds, the information infrastructure has proven robust in the U.S., where neither regulators nor Internet Service Providers (ISPs) have had to ask content suppliers not to “break the Internet.” Indeed, American broadband networks have responded to this extraordinary period by relaxing data caps and extending free Internet access to households with schoolchildren quarantined at home.

A long-running theme among critics is that American Internet service lags because U.S. policies are too market-friendly. “Americans aren’t quite aware of it because we don’t look beyond our borders,” Harvard’s Susan Crawford told NPR in 2014, “but we’re falling way behind in the pack of developed nations when it comes to high-speed Internet access, capacity and prices.” NYU economist Thomas Philippon’s 2019 book, The Great Reversal: How America Gave Up on Free Markets, was motivated by his observation that European economies have advanced past the U.S. in—as his primary example—“home Internet access.” Citing a survey indicating that U.S. households paid about $66 a month for residential broadband while German households paid just $36, he asks, “How did the U.S. . . . become such a laggard?”

We haven’t. In fact, the U.S. is leading the world in Internet usage and our networks flood Americans with data—both now and before the crisis. There are many ways in which we might do better, and sudden demand surges may require new remedies, but America’s broadband networks are performing relatively well.

This will come as news to those who insist that less-regulated markets unfairly carve out “fast lanes” and permit “paid prioritization.” When an ISP, like Comcast, asks a content provider, like Netflix, to help pay to build the last-mile connections to end users, part of the deal may include assurances that consumers will have easy access to the content they want. The outrage this approach generated, between 2013 and 2015, was a key driver in the network neutrality debate and led to the 2015 “common carrier” rules (mostly repealed or lapsed now) that gave the Federal Communications Commission the authority to regulate such practices.

The fear was misplaced. Companies that forge win-win deals to encourage more capacity are productive innovators. As Doug Brake of the Information Technology and Innovation Foundation writes, “Data traffic prioritization is one of the most unfairly maligned technologies. Caricaturing commonplace network management techniques as ‘fast lanes,’ net neutrality activists warn that introducing the option of paying for specific performance levels of Internet traffic will destroy the characteristic ‘openness’ of the web. This is false.”

The payoff is that Netflix (or Hulu, Amazon, or YouTube) have forged bargains with ISPs: if you subscribe to Comcast, you might notice that Netflix is so integrated into its network that a button on your cable TV remote clicks you right from CNBC (owned by Comcast) to Netflix—away from the cable operator’s shows and onto a streaming “over-the-top” media platform. These non-neutral arrangements, along with side payments between the companies, fundamentally support Internet growth.

So while Netflix and Amazon have been throttling their video services in Europe, reducing their customers’ data consumption by one-fourth in response to surging demand, high-definition streaming, following a long trend, remains the U.S. norm. In a 2012 paper in the Journal of Law & Economics, Michal Grajek and Lars-Hendrik Röller found that higher levels of regulatory control (with rules designed to force network sharing) undermined investment incentives, reducing information infrastructure across Europe by 23 percent. Similar rules have been implemented in the U.S. and then been largely liberalized, forming the crux of the “under-regulated” thesis. And U.S. network investments are higher than in Europe, accounting for population and relative economic output.

Despite arguments that the U.S. is falling behind, these network investments pay off. American Internet users consume considerably more data than do Europeans on a per-capita basis. According to Cisco, ISP end-users in the U.S. and Canada stream 115.6 gigabytes of data per month, compared with 43.8 gigabytes in Western Europe and 10.6 gigabytes in Asia Pacific.

The same basic story holds for mobile broadband. The U.S. subscriber pays more but gets more. In terms of per-capita wireless data usage, Americans consume nearly four times as much as their counterparts in Germany, according to the latest OECD data. Finland is off the charts for mobile network usage, incidentally, wolfing down far more data than any other country. This is likely a product of its extremely liberal allocation of the radio spectrum, where the Finns outperform U.S. regulators (in the most valuable low-band and mid-band frequencies) by about 70 percent.

Now that’s a European policy we could learn from. But stepping up our regulation of broadband Internet? Most of us would prefer being able to video-binge in High Def.

Photo: hocus-focus/iStock

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