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May 12, 2005

Japan Inc. 2 (yeah right)

In an article at Foreign Affairs, Down to the Wire, Tom Bleha argues for massive government intervention the us telecom and cable industry to expand the aviability of home and mobile braodband. He does a good job of showing that the South Koreans and the Japanese do have higher penetrations of both, and faster service when they have it. What he doesn't sucessfuly explain is why we should care. The benefits of widespread broadband adoption are surely overblown and the reasons for America's lower adoption rates are sensible and explainable.

A major reason for America's lower broadband penetration is population density. Japan has a population density of 337 inhabitants/km². South Korea of 492 . The US has a population density of 31 inhabitants/km². A huge difference. Second, he argues that broadband is much less expensive in Japan than in the USA. However, the true economic cost must include all subsidies, and Japan is notorious for its massive subsidy of infrastructure. It is still unclear that subsequent revenues justify these outlay or that they are the most effiecnt use of capital. Also, we know that broadband is a good with network effects. Being able to share files, photos and games with friends and family, as well as share expertiese and interesting websites makes adoption accelerate. That means that the subsidy has masive distortion in adoption rates.

Major benefits? " The Japanese and the South Koreans will also be the first to enjoy the quality-of-life benefits that the high-speed-broadband era will bring. These will include not only Internet telephones and videophones, but also easy teleconferencing, practical telecommuting, remote diagnosis and medical services, interactive distance education, rich multimedia entertainment, digitally controlled home appliances, and much more. " If this is the best that anyone can come up with, then who cares? More bandwidth to steal movies? Buying soda's with cell phones? Videophones have been around since 1970 and still no one wants them. Remote diagnosis and medical services? Maybe, but this is likely to be in a clinical setting, and those places already have great access to broadband. Many of them don't depend on being real time either.

Posted by OneEyedMan at May 12, 2005 2:04 PM

Comments

The WSJ points out today that:

If you compare the broadband penetration rates of some "leading" countries with comparable U.S. states with similar population density, you see similar penetration rates. For example, Japan, which ranks 8th in the OECD report has a population density of 350 inhabitants per square kilometer and has 15 broadband subscribers per 100 inhabitants. These numbers are very similar to Massachusetts which has a population density of 317 inhabitants per square kilometer and 18 broadband subscribers per 100 inhabitants.

@ http://online.wsj.com/article/0,,SB112070076371879188,00.html?mod=opinion%5Fmain%5Fcommentaries

So I guess that others see the flaws in Bleha's argument.

Posted by: TheOneEyedMan [TypeKey Profile Page] at July 8, 2005 1:48 PM

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