Reason.com

Free Minds & Free Markets

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/FlickrMarco Assini/FlickrAmericans 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.

Photo Credit: Marco Assini/Flickr

Editor's Note: We invite comments and request that they be civil and on-topic. We do not moderate or assume any responsibility for comments, which are owned by the readers who post them. Comments do not represent the views of Reason.com or Reason Foundation. We reserve the right to delete any comment for any reason at any time. Report abuses.

  • A Cynic's Guide to Zen||

    OT: Trump forces YouPorn and Pornhub to offer free encryption services to their "customers" because these private companies believe "Someone should step in and protect the consumer."

    9D Chess.

  • A Cynic's Guide to Zen||

    Uh oh DanO. Explain:

    ~90% White Danes (89.77%) and 80% One Religion (Church of Denmark): We're all the same because we are literally all the same!

    Except: "Moreover, according to the figures from Danmarks Statistik, crime rate among refugees and their descendants is 73% higher than for the male population average, even when taking into account their socioeconomic background."

    Give it time, DanO. Diversity will be their strength soon enough.

  • Citizen X - #6||

    Janteloven is a hell of a drug.

  • A Cynic's Guide to Zen||

    Cultural homogeneity is so gay.

  • Citizen X - #6||

    YOU'RE homogenous!

  • A Cynic's Guide to Zen||

    Homo-genius! Where's Scott?

  • Diane Merriam||

    Also, the Scandinavian countries are and always have been highly free market oriented, something those who promote them always seem to leave out. They have an expensive social safety net (although that is now shrinking too) with its corresponding high taxes, but very little business regulation.

  • Wizard4169||

    Of course. A mostly-free market is the only system than can possibly produce enough wealth to underwrite their welfare state.

  • Citizen X - #6||

    +108% tax on car purchases

  • Citizen X - #6||

    Also, i would be remiss if i did not point out that Wireless Penetration was my nickname in college.

  • A Cynic's Guide to Zen||

    You must have been a real 4G back then...

  • jack sprat||

    ^this never gets old

  • Jerryskids||

    The Danes, like the Swedes and the Norwegians and the Finns, have a long history of a largely homogenous population. Lots of social interaction works fairly well when everybody's a member of one of the six extended families that have populated the country for centuries and your survival depends largely on staying in the good graces of your family by following the unwritten rules and regulations, the customs and traditions. Import a few million Chinese, Pakistanis, French, Arabs, Bulgarians, Guatemalans, Congolese, and a Spaniard and see how the social compact fares.

  • Merl3noir||

    A poniard... Does he get a pear tree?

  • Enjoy Every Sandwich||

    So how did Denmark do it? Deregulation.

    (Impatient proggie sigh) We're not supposed to follow those examples from Scandinavia. Just the socialist ones.

  • Unicorn Abattoir||

    Agreed. Our telcom system should be developed so that it can be put together with a single allen wrench.

  • Longtobefree||

    I missed the source citation to show that the policy will scale up to the size (population and geography) of the US.

  • JunkScienceIsJunk||

    Why wouldn't it?

  • jonnysage||

    It already does. For 30 years now the internet has basically been the wild west.

    The FCC is trying hard to fix that.

  • The Last American Hero||

    It also doesn't hurt that the country essentially has 2 cities and 50% higher population density. Running one fiber line down main street solves their "last mile" problem.

  • EscherEnigma||

    According to Wikipedia, Denmark has 5.614 million people in 16,574 square miles, giving an average population density of 338.7 people/square mile.

    In comparison, the US has 318.9 million people in 3.797 million square miles, giving an average population density of 84.0 people/square mile.

    The US discounting Alaska has 318.2 million people in 3.134 million square miles, giving an average population density of 101.5 people/square mile.

    Hrm... for another comparison, the states with the closest population density are Florida (378 people/square mile) and Pennsyvania (286 people/square mile). Ranked by population density (rank #1 being New Jersey at 1,218 folks/square mile), Pennsylvania is #9.

    So when you're talking about rural Denmark, you're talking something comparable to Pennsyvania, not New Mexico.

  • Unicorn Abattoir||

    I'm missing something here. If you're discussing population density, why would you compare rural Denmark to all of Pennsylvania, rather than rural PA?

  • EscherEnigma||

    Because I'm not?

    I can see how you could read it that way, but that wasn't the intent. Mostly I was trying to show the differences between Denmark and the US.

  • Unicorn Abattoir||

    Got it.

    In other words, yes, I was missing something.

  • E. Zachary Knight||

    That is all well and good. However, we have more problems aside from Population Density and the FCC. One problem is bought and paid for state legislators who pass laws that entrench ISP monopolies. Say Rural town of 5,000 people in Pennsylvania are tired of the monopoly ISP only offering them 10Mbps down and 500Kbps up speeds. The town then votes to build out a fiber network to every home in their jurisdiction and then lease out the lines to any ISP that wants to sign up new customers. What does monopoly ISP do? It runs crying to the Penn legislature and has them pass a law that makes such town owned networks illegal.

  • Dadlobby||

    Valid point. New Mexico getting wired? I'm 15 Minutes from Amsterdam and 20 from Schenectady in NYS and have to live on DSL or 2 bars of wireless. Fire the regulators and I might have a chance of something getting "out" to me. PA's population is on both ends, it'll be a long time until it gets to the middle (although the Amish won't notice).

  • Stephen54321||

    "Denmark in particular is praised for its stellar telecommunications services."

    That statement is misleading. The article on DailyDot which it references is titled "Record for world's fastest Internet connection broken in Denmark". Having the FASTEST Net connection is not necessarily the same as the BEST telecommunications services, which is what that statement is implying.

    There are a whole heap of other factors to be considered like the cost consumers are charged for their connections and the rights they enjoy when they are on the Net.

    For example, the US Congress has just passed a bill cutting back user privacy on the Net. Then there is the issue of Net neutrality, which Trump is reportedly intending to skewer. (Meaning having the fastest Net connections is not much use to ordinary users if only the wealthy can afford them or if only large corporations (e.g. Google, Facebook) can afford to pay the premiums which services would be allowed too charge if Net neutrality were abolished.

    The article then goes on to boast about Denmark's "ample provider competition". That is not the case the US where big conglomerates (e.g. Comcast) hold monopolies or near-monopolies in many regions. Doing away with the FCC would not improve that situation. Abolishing the FCC would not fix that problem. Not as long as Congress and Administrations continue to allow companies to merge or be taken over to create such monopolies in the first place.

  • Number 2||

    Another one.

    Please look up the history of the FCC's treatment of FM radio and "pay TV" (better known today as cable) and tell me again how the FCC protects innovation and defends consumer interests again the Big Evil Entrenched Corporations.

  • Stephen54321||

    "Please look up the history of the FCC's treatment of FM radio and "pay TV..."

    First of all, a link would be nice. Or failing that the title and/or author of the history you are alluding to. If you can't provide that, then do such things even exist, at least on the Internet?

    Secondly, abolishing the FCC because it does NOT protect innovation or consumer interests would be kind of like arguing Congress ought to be abolished because for the past thirty-something years it has done a plain awful job at protecting the rights of working and middle class Americans (e.g. all those Rust Belt states folks Trump won over) but does manage to protect the interests of the 1% by giving multi-billion dollar corporate bail outs and tax cuts.

    If they aren't doing what you expect them to do then you reform them. You don't abolish them. Abolition would only make a bad situation worse.

  • marshaul||

    Rube.

  • Stephen54321||

    Ad-hom insults merely demonstrate that those who use them have nothing intelligent to say.

  • Chocolate Starfish ( . )||

    byte me

  • JunkScienceIsJunk||

    Great points, Stephen. Especially your last one. Many of the restrictions are the result of local governance. I live in one of the largest cities in the US, and there are pockets that do not have access to Fios (let alone the many others who endeavor to sell ISP or content to consumers) strictly because the city council refuses their entry. There is a lot of evidence to suggest that this is at least partially due to kickbacks from Comcast. But the issue is much deeper than that -- like the Uber issue, local yokels have complete control over whether companies can operate.

    Abolishing the FCC does nothing to address these very real issues.

    It also doesn't fix the underlying issue that many of these companies require public support in some shape or form. Libertarians can't even agree on what public property is, whether it is right to exist, and how it can/should be managed. Until we figure that one out, how do we manage 4872 companies asking to string fiber optics on public poles?

  • jelabarre||

    There's a reason they're called Crapcast (or suXfinity,if you prefer).

  • Diane Merriam||

    Those monopolies are government created and maintained. It's not like there's much of any free market involved, so you can't complain that the market doesn't work - there isn't one.

  • Diane Merriam||

    Those monopolies were created and maintained by governments. You can't complain that the market doesn't work when there never was one to begin with. I don't know how old you are, but I remember well when cable tv was new and the "franchises" were "awarded" by local and/or state governments. The FCC is just the latest layer of regulatory frosting on the cake.

  • Old Monkey||

    It's a lot easier to implement policies for 15 million than over 300 million. 15 million is upper end of the sweet spot for social democracies. It's also an inconvenant fact social democracies have homogeneous populations.

  • jerbigge||

    We should remember here that Denmark is less "responsive" to the interests of big business than is the US. The major beneficiaries of FCC regulations have been the telecommunication corporations. Such practices as attempting to deny local governments from setting up their own Internet service illustrate beyond doubt that these businesses are all in favor of "government regulation" as long as it benefits them and eliminates possible competition from others. Cable customers actually pay the "franchise fee" that their cable company pays to their local government to keep out possible competitors.

  • Fk_Censorship||

    Is this the same country that just outlawed Über? You win some, you lose some, I suppose.

  • ikaiyoo||

    Yeah you might want to go actually research shit before you decide to publish.
    This is 5 minutes of google btw.
    https://danishbusinessauthority.dk/telecom
    "The Danish Business Authority regulates competition in telecommunications markets. Conditions for a competitive market are analyzed and on this background obligations are imposed on companies that hold strong market positions. The Danish Business Authority carries out control to make sure that telecommunication companies live up to these obligations.
    The Danish Business Authority aims to regulate the telecoms sector to ensure fair competition, so that businesses and citizens alike can benefit from reasonable pricing and a broad range of choices. We do this by analyzing the competitive situation in the market, creating models for pricing, and making decisions concerning interconnection agreements."
    That sounds like the FCC to me only they also deal with:
    Company and Business
    Innovation and Growth
    EU and International
    Telecom
    Spatial Planning
    So I am not sure where you are getting that Denmark is basking in the rays of free market capitalism with the fastest internet speeds and healthy competition governing their actions not the government.
    But you are wrong. Horribly wrong. So wrong I probably wont read another article of yours again because I dont want to have to fact check everything someone says to make sure they arent full of shit. Especially things found after 5 minutes of google. Christ put in some effort.

  • sungazer||

    One could address the questionable facts of this article, but that misses the point. Fuck Comcast. Let me know when there's some decent competition, because as far as I can tell it's not the FCC preventing competition in this racket.

  • Wizard4169||

    I get my interwebz (and cable TV) courtesy of Comcast. But, I'm lucky enough to live in a city where Comcast doesn't have a state-bestowed monopoly. Therefore, Comcast doesn't screw me. (Well, maybe they screw me a little. But they at least have the decency to take me out to dinner first and give me a reach-around, so it's not that bad...) Where there's real competition, most of the problems just seem to go away. Funny how that works...

  • Snort||

    Denmark is about 16,600 square miles, which means there are 4 counties in America that are larger. It's population is a little over 5 million, which makes it smaller than Maryland. The telecommunications industry is regulated by the Danish Business Authority, so yes, they are regulated. Denmark does have a few small domestic carriers but have access to the E.U.'s carriers as well. Included in the list are Vodafone, Orange, T Mobile, Telenor, TDC, Telia, Hutchison 3 and Net 1. This info is from a quick Duck Duck Go search, but to me looks sound. And on a side note, none of the 4 American counties larger than Denmark have their own FCC either.

  • Snort||

    Denmark is about 16,600 square miles, which means there are 4 counties in America that are larger. It's population is a little over 5 million, which makes it smaller than Maryland. The telecommunications industry is regulated by the Danish Business Authority, so yes, they are regulated. Denmark does have a few small domestic carriers but have access to the E.U.'s carriers as well. Included in the list are Vodafone, Orange, T Mobile, Telenor, TDC, Telia, Hutchison 3 and Net 1. This info is from a quick Duck Duck Go search, but to me looks sound. And on a side note, none of the 4 American counties larger than Denmark have their own FCC either.

  • Snort||

    Denmark is about 16,600 square miles, which means there are 4 counties in America that are larger. It's population is a little over 5 million, which makes it smaller than Maryland. The telecommunications industry is regulated by the Danish Business Authority, so yes, they are regulated. Denmark does have a few small domestic carriers but have access to the E.U.'s carriers as well. Included in the list are Vodafone, Orange, T Mobile, Telenor, TDC, Telia, Hutchison 3 and Net 1. This info is from a quick Duck Duck Go search, but to me looks sound. And on a side note, none of the 4 American counties larger than Denmark have their own FCC either.

  • Snort||

    Denmark is about 16,600 square miles, which means there are 4 counties in America that are larger. It's population is a little over 5 million, which makes it smaller than Maryland. The telecommunications industry is regulated by the Danish Business Authority, so yes, they are regulated. Denmark does have a few small domestic carriers but have access to the E.U.'s carriers as well. Included in the list are Vodafone, Orange, T Mobile, Telenor, TDC, Telia, Hutchison 3 and Net 1. This info is from a quick Duck Duck Go search, but to me looks sound. And on a side note, none of the 4 American counties larger than Denmark have their own FCC either.

  • Snort||

    Sorry for the repeat(s). Computer problems.

GET REASON MAGAZINE

Get Reason's print or digital edition before it’s posted online