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China Believes Ending Government-Run Internet Monopoly Will Reduce Prices

May 12, 2015

iStock_000006799258SmallThe Coalition for the New Economy has written previously about how former President Bill Clinton and his administration explicitly argued, while writing the United States’ first federal Internet policy, against government ownership of the Internet or broadband.

Since then, private sector companies have invested more than $1.3 trillion to expand broadband across the country and, as a result, more than 98 percent of Americans have access to high-speed broadband. Speeds continue to quicken and prices continue to fall – and private sector companies continue to make advancements into the areas of the country that do not yet have broadband access.

The competitive environment envisioned by the Clinton administration has worked.

Who has learned from this lesson? China.

According to the legal website Out-Law.Com, the communist nation has decided to allow the private sector to invest in broadband in the country. Why is China moving in this direction?

Out-Law.Com says it’s in response “to a call from premier Li Keqiang last month for cheaper and faster Internet …” Turns out the current “high fees” the Chinese pay for Internet are the result of “a lack of supply in the market.” In other words, they’re the result of a government monopoly.

China’s Ministry of Industry and Information Technology hopes inviting in private investment will “cut costs to consumers.” According to China News, “The ministry will expand investment into the broadband sector, including an attempt to attract more private capital into the communications market and allow more private companies into China’s broadband sector, which will break the monopoly and eventually bring down internet fees.”

Paul Haswell of the law firm Pinsent Masons said, “Allowing private investment is important for two reasons: firstly the investment can result in an increase of Chinese citizens who are online, and second it suggests willingness, or at least an initial willingness, for China to open up its closed and highly regulated communications market.”

China’s announcement is a good reminder for U.S. policymakers: breaking down barriers to private investment in broadband is the best way to lower prices, not increasing government involvement.