Verizon’s Crazy Broadband Strigl Theory

Verizon President and Chief Operating Officer Dennis Strigl made a big splash at NXTcomm 08 yesterday when he announced that the entire Verizon FiOS footprint could now get speeds of 50 megabits per second. Typically such bandwidth news wouldn’t cause that much of a furor, but there wasn’t much to write home about from the show, which was held in Las Vegas this week.

In his speech, Strigl pointed out that the U.S. has the highest number of broadband users when compared with other countries, in particular that broadband is available in every U.S. zip code. Good point — and one that I’ve made in the past myself — except that it’s no longer true. By that metric, China now leads. Yes, the FCC used to defined broadband as a service that offered, at a minimum, 200 kbps downloads, but it’s since changed that requirement to 768 kbps.

But where Strigl went too far was when he suggested that three-quarters of American households have two providers to choose from — aka a duopoly, which is not my idea of a competitive marketplace. If you factor in wireless and satellite, he said, there are actually six or seven competitors. Talk about twisting the facts to fit one version of the truth! This part of his speech, however, had me choking on my breakfast cereal.

“Massachusetts and New Jersey have similar population density to Korea and Japan and similar broadband penetration. Unlike other countries, what we have accomplished has come not through [government] policy but through private investment.

How telling. So subverting government policy via lobbyists and highly biased friends at the FCC to ensure a future monopoly is all part of good, capitalistic, private investment theory? Maybe Harvard can include that in its future MBA curriculum.

Regardless, I thought it would be fun to see how Massachusetts and New Jersey really square up against South Korea and Japan when it comes to the price of a broadband connection:

Average broadband speeds in South Korea and Japan are 49.5 megabits per second and 63.6 megabits per second, respectively. The average U.S. speed is about 4.9 megabits per second, making it the 14th-fastest country in the world. The average price in South Korea and Japan is about 83 cents per megabit. In the U.S, it’s about $2.83.

But since it would be unfair to use average U.S. stats, I went with Verizon’s prices, the ones it’s going to offer in Massachusetts and New Jersey. On Verizon’s FiOS network, a 50 Mbps connection costs $140 a month — or about $2.80 a megabit. In fact, if you went with Verizon’s 20 Mbps service, you would be paying $3.25 per megabit. (To be fair, Verizon’s price-per-megabit is still cheaper than the $5.25 Qwest charges for its 20 Mbps connection, which costs $105 a month.)

In other words, not until Verizon starts selling a 50 Mbps connection for $41.50 a month and 20 Mbps fiber connection for $16.60 a month can Strigl get away with comparing U.S. broadband with that of the rest of the world.