More proof that without competition U.S. broadband costs more and delivers less

The fastest, cheapest broadband in the world can be found in South Korea, with a triple play bundle that costs the equivalent of $36.31 and delivers gigabit speeds. This data is from the 2013 Cost of Connectivity report out today from the New America Foundation.

The report, now in its second year, attempts to compare U.S. broadband offerings to the rest of the world. It found that once again, that based on speed U.S. broadband is more expensive than many other cities. If that feels like a somewhat weak and obvious conclusion, it’s because the variables associated with pricing broadband are many.


One must take into account speed, price, service bundles and issues such as data caps or throttling. Broadband is such a local phenomenon that it makes it tough to say the U.S. is falling behind when it’s home to multiple gigabit networks. And there are plenty of places in the world, where broadband networks cost more and offer less. Yet, a few conclusions do emerge from this report, namely that places in the U.S. with the best speeds and lowest pricing tend to be areas with multiple providers.

Our data also shows that the most affordable and fast connections are available in markets where consumers can choose between at least three competitive service providers. This trend is consistent with last year’s data, and also underscores the critical role that competition plays in determining broadband prices and speeds. According to the 2010 National Broadband Plan, only nine percent of Americans have access to three or more providers; the majority are limited to one or two incumbent telephone or cable companies.

The ISP perspective

While wireless is often considered a third competitor to wireline networks, high costs and relatively low data rates when compared to gigabit or even 100 Mbps networks, mean that it’s a pretty lame one as the nation upgrades its wireline network in more places.


Really, none of this is new information. It’s just harder to argue with it when presented with chart after chart of places that pay less for broadband than you do. And while last week, Verizon offered up the stat that U.S. ISPs invest more in their networks the details behind the stat were unclear. Here’s what Verizon said:

Americans, just 4 percent of the world’s population, are well served by carriers that invest in broadband deployment at an annual rate equal to one-fourth of the world’s entire broadband investment. The EU has a population more than twice that of the USA but has broadband investments of less than 25 cents for every dollar invested in America. This is one of many reasons the EU has a broadband challenge.

But going to the original source of that data reveals it’s a conclusion at the end of a really interesting article, but doesn’t share if that’s total investment is in wireline only, or encompasses the U.S. rapid mobile advancement to LTE networks. It also tough to compare costs when density is such a factor in the cost of rolling out broadband. Yet, it’s a stat worth looking into, especially as we invest in fiber to the premise networks that will require new investment.

What this means for your broadband

Meanwhile, I’ll leave y’all with the data from the Tech Policy Daily post that I found pretty fascinating. While I don’t agree with the conclusion of the quote, which is that ISPs don’t need to invest in fiber to the premise, because people don’t need it today, I liked the breakdown looking at what the analysts think people need, based on take rates for fiber to the home in Europe.

For residential uses, the model suggests that 40-130 Mbps down/10 Mbps up can satisfy a family of 4 heavy users. For a family with medium needs, 30-70 Mbps/10 Mbps is sufficient. A typical senior couple would be served by 20 – 100 Mbps/10 Mbps. As for small and medium businesses, for example an E-learning provider would need 100 Mbps symmetrical while an architectural firm would need over 100 Mbps. The point is that today’s technologies and their availability more than satisfy today’s uses. As long as operators deliver the speeds that are needed just in time, customers are served. There is little social or business benefit to build capacity for more or before than it is needed.

Even if you do buy into this idea of just-in-time broadband investment and advancement, you’d need a more competitive environment to ensure that it actually happened. Duopolies and monopolies are not the fast-moving, responsive organizations that a competitive environment produces. So even if we ignore the time frame that investment in broadband requires (years, not weeks) and the fact that some “just-in-time speed effort might miss a huge jump in demand caused by a new service, believing that an uncompetitive market can deliver highly reactive services is tough.

Which is why we need the data that this report provides. Yes, the U.S. may have some impressive broadband success stories that are already influencing other providers, but since broadband is inherently local and inherently uncompetitive, to get anywhere we need data that puts pressure on the incumbents to keep pushing the envelope. Otherwise, a few cities will have better broadband, and the rest of the country will have to wait until their ISPs think they need faster speeds.