Denmark Proves We Don't Need the FCC

By nearly eliminating their equivalent of the Federal Communications Commission, Danes now enjoy some of the best IT and telecom services on earth.


Marco Assini/Flickr

Americans often look to Scandinavian countries for examples of successful policy and governance. It's easy to see why: These countries boast some of the best quality-of-life rankings in the world. Denmark in particular is praised for its stellar telecommunications services. The country has topped the International Telecommunications Union's ranking of global information and communication technology (ICT) provision for years due to its expansive broadband and wireless penetration, fast Internet speeds, and ample provider competition.

The Danish reputation got a boost among the American left in last year's presidential election, when none other than Bernie Sanders himself plugged the country as a model for the United States to emulate. But admirers of the popular democratic socialist politician may be surprised to learn exactly how Denmark was able to become an international leader in ICT delivery. It wasn't super-charged regulation, top-down "net neutrality" rules, or major government subsidies that did the trick.

So how did Denmark do it? Deregulation. By virtually eliminating their equivalent of the Federal Communications Commission (FCC), Danes now enjoy some of the best ICT service on the planet.

A new Mercatus Center working paper by Roslyn Layton and Joseph Kane describes precisely how Danish telecommunications officials undertook successful deregulatory reforms. It starts with Danish regulators who quickly understood the promise of digital technology and realized that government policies could quash innovative applications that would benefit consumers and businesses alike. From there, they developed a plan to prioritize competition and development instead of central control. This hands off-approach was so successful that eventually the country's National IT and Telecom Agency (NITA) was disbanded altogether.

Committed to Competition

In 1994, when most governments hadn't even started to consider the impending digital revolution, Danish authorities had already laid out a clear path for simple telecommunications policy. Their plan emphasized facilitating interactions between the public and private sectors instead of rushing to regulate.

The Danish government also undertook early efforts to modernize their own services by digitizing government records, thereby becoming a key buyer of ICT services. Government services became more efficient, and the infant ICT sector got an enthusiastic and large client.

Policymakers clearly stated their opposition to subsidy-driven "growth" and heavy-handed regulation. The country's state-owned telecommunications provider, Tele Danmark (TDC), was completely privatized in 1998 through the efforts of Social Democrat Prime Minister Poul Nyrup Rasmussen. The next year, a consortium of Danish political parties formed a "Teleforlig," or telecommunications agreement, that outlined their goals. It stated:

It is important to ensure that regulation does not create a barrier for the possibility of new converged products… Regulation must be technologically neutral, and technology choices are to be handled by the market. The goal is to move away from sector-specific regulation toward competition-oriented regulation.

And Danish regulators kept this promise. For example, following the privatization of TDC, NITA levied special regulations on the provider so that it would not abuse its previous monopoly to prevent new competition in wireless. TDC was therefore subject to controls on its access to mobile networks and call origins. But NITA discovered that the wireless industry was sufficiently competitive by 2006, with four active providers in the market. Remarkably, NITA then dissolved the TDC regulations. As one official stated, "We are obliged to remove the regulation when the competitive situation demands it. There is no need to regulate something that market forces can take care of."

By 2011, Danish ICT provision had become so competitive and responsive to market needs that NITA closed up shop all together. Interestingly, this major deregulation was not the undertaking of a wild-eyed free market party, but rather a consortium of the center-left ruling parties. Nor did the development make much of a splash in the public eye, receiving very little public press or debate. According to those involved with the reform, there was simply no need to operate a specialized telecommunications regulator anymore. Plus, the existence of a specialized telecommunications regulator could lend itself to regulatory capture and corruption—why invite temptation? Hence NITA was disbanded and its limited regulatory functions were transferred to the general Danish Business Authority.

What Americans Can Learn From Denmark

As so-called "net neutrality" again grabs headlines in the U.S., the Danish experience is especially stark. Where the allegedly "socialist" Denmark has consistently stripped down onerous telecommunications regulations and enjoyed enhanced competition and service, the allegedly "capitalist" United States has continually expanded the FCC's reach and limited market entry. In fact, as my colleagues Brent Skorup and Kane have pointed out, the FCC has found creative ways to extract new authorities for itself throughout time. The result is a massive, labyrinthine regulatory complex with little critical oversight or even understanding of its actions or the rationales behind them.

The Danish example is proof that an FCC-like body is not necessary to enjoy the outcomes Americans desire. I've already discussed the market benefits that telecommunications deregulation brought. But Denmark is actually a leader in self-regulation as well.

Consider net neutrality. In 2011, a group of Danish industry representatives and government regulators formed a private body called the Net Neutrality Forum. This group developed a set of voluntary net neutrality principles comparable to the FCC's "Four Freedoms" of 2004. The group meets on an ad hoc basis to adjudicate any conflicts with their principles that do arise. (To date, there has been only one issue concerning a surcharge for WhatsApp access; the body advised against the practice, and the industry participants voluntarily obliged.) The result? Denmark's voluntary net neutrality system sparked a revolution in mobile-app development in the country. Meanwhile, countries that chose top-down net neutrality regulation have remained stagnant.

In the United States, commentators are absolutely losing their minds over a congressional overturn of one arbitrary FCC regulation. That regulation, which bars internet service providers from selling bulk data to advertisers in the way that Google and Facebook do, could perhaps be better addressed by existing Federal Trade Commission rules anyway; perhaps FCC Commissioner Ajit Pai is taking a page from the Danish book by moving to yield regulatory authority to a more appropriate, generalized body. Yet even this minor rescinding of a rule that has not even taken effect yet is generating major controversy.

The Danish model shows that living without the FCC is not only possible, it is downright desirable. Yet it also demonstrates how important bipartisan collaboration and reasoned discussion are to successful regulatory reform. Judging by the emotional rhetoric that so often accompanies any discussion of the golden calf of "net neutrality" in America, we might have quite a bit of work to do.