Are Japan and Korea Really Ahead of the U.S. in Broadband?

What advantages do Japan and South Korea have over the United States in terms of broadband?

Broadband has enabled entertainment but not employment. Broadband has enabled some industrial productivity and supports a marginal “Gangnam Style” entertainment economy in South Korea. It is estimated that performer Psy made about $8 million from his famous song [in the wake of the] 1.6 billion YouTube views and the iTunes sales. His is not a replicable business model, let alone a business case for broadband. A new report by the Korea Information Society Development Institute, “A Study on the Impact of New ICT Service and Technology on Employment,” bemoans the situation of “jobless growth.” The government is also concerned about Internet addiction, which afflicts some 10 percent of the country’s children aged between 10 and 19, who essentially function only for online gaming but not in other areas of society.

The real money in South Korea’s economy still comes from electronics, automobiles, shipbuilding, semiconductors, steel and chemicals—the same growth engines from the pre-broadband days. Ditto for Japan and Sweden. The national broadband project in South Korea has not yielded the jobs that were expected.

There’s a lot of talk about the fiber to the home networks in Japan and South Korea. What’s going on there?

Well, what those economies have achieved is impressive. Japan and South Korea have had the ability to mobilize [their nations] to achieve singular goals. Think about Japan with the auto revolution and Korea in the 1950s when they jettisoned Western advisers who told them to grow rice. Instead, they developed electronics industries.

How do we rank here, in comparison?

When the mayor of New York lured Google (GOOGL) to the city, he had in mind building an ecosystem of IT companies, making New York City a true Silicon Alley. The difference for the U.S.A. in the world economy is that it can turn broadband into real companies. The largest 14 American Internet companies drive $1 trillion in revenue annually. No other nation comes close. So broadband is not enough; it needs to be a part of an ecosystem with highly skilled workers, venture capital and a larger market to sell digital goods and services.

Compared to the U.S.A., these countries have more collective societies and cozy relationships between business and government. While the zaibatsu and keiretsu systems no longer exist in name, both of these governments want to ensure that their incumbent telecom companies survive, and business plans of 200 years or more are not uncommon. Thus any national fiber plan is certainly good for the incumbents.

The Japanese improved their case for fiber by using wires above the ground, similar to telephone phone lines of old. This certainly helped to lower the deployment cost, as well as the fact that most people live in apartments. Carriers were responsible for the cost of fiber to the building; the landlords are required by law to take it … from there.

What can New York City learn from these countries about its own broadband program?

The Korean government sponsored a program in which the landlords of high-rise buildings got a rating from the government about the quality of the broadband in the building. Four grades—bronze, silver, gold, platinum—correspond to level of service and maintenance. The certification is now a marketing tool for landlords. The law requires the Internet service provider to bring the signal to the basement. The landlord takes over from there. There’s a rumor that Bloomberg wants to do something similar.

Some nations can turn disadvantages into advantages. Japan is an island country the size of California, and people live on just 20 percent of the land. The rest is mountains, and it turns out that this makes great conditions for fiber networks. Most people live in apartment buildings, so it improves the case of [fiber to the home] dramatically.

Similarly South Korea is the size of Kentucky, and its capital Seoul is the world’s sixth most dense city—17.5 million inhabitants, some 16,700 per square kilometer.

Interestingly, the greater New York area has the same population as Seoul, but is only one-eighth as dense.

Why can’t we do this in the U. S.A.?

Governmental policies play a big role. Japan and Korea had national broadband policies in place by the year 2000. The U.S. didn’t get a plan until later. It’s not that the U.S. didn’t have its act together, but rather Japan and South Korea for historical and cultural reasons are much more collective societies. The government plays an active role in industrial life, and broadband was a key area of focus.

I suspect that most Americans would not be keen about a national [fiber to the home] plan that expressly rewarded AT&T, Verizon, Comcast or Time Warner. Americans value the more decentralized nature of their government where communities have more flexibility to determine their broadband needs. The downside means less coordination. This can have an impact for carriers who have to take into account different rules for every municipality in which they work.