The United States: First World Country, Third World Broadband

-- By EdwardBontkowski - 12 Nov 2009

A Disturbing Revelation

Back when I was in middle school, I was an avid online video game player, playing mostly MMORPG’s and first-person shooters. Playing online games on a dial-up connection was mostly an exercise in futility. However, in 1998 cable broadband internet became available in our neighborhood. After a few years with cable internet, I started to notice something rather disturbing. My bandwidth speeds weren’t getting any faster, yet the bandwidth speeds of online friends (that I had met through gaming) from Europe (especially Scandinavian countries) and Korea had home access to bandwidth speeds that put mine to shame. And to top it all off, they were paying a fraction of what I was paying.

When I attended college in 2003, I finally had access to similar speed broadband that my European and Korean friends had been having delivered to their homes for the past 2 years. In an ironic twist of fate, though, I learned that my university was imposing a cumulative upload and download limit of a paltry 500MB per day (they said that that was all the bandwidth they could provide, but I'm pretty sure it was music industry reps pressuring them). In any case, I was in the same situation I was in before—bandwidth that significantly lagged behind my European and Asian friends.

American Broadband Speeds Are Second Rate

In Japan, broadband service is available at speeds up to 150 Mbps for only $60 a month. In the U.S., the fastest commercially available broadband is 50 Mbps and it costs $90-150 a month. In London, 8 Mbps speed can be bought for $9 dollars a month, whereas in New York 1 Mbps speed costs over twice that much. The average broadband speed in Japan is 16.7 Mbps. The average in Sweden was 8.8 Mbps. The average in the United States was a relatively snail-paced 5.2 Mbps.

So how is it that the United States, a country once at the forefront of the high-speed internet movement, has fallen so far behind the rest of the world? For sure, one significant factor that explains the speed disparity is population density. With over half of Korea’s population living in incredibly dense apartment complexes, Korean ISPs do not have to provide connections to an large geographic area like U.S. ISPs have to. However, as big of a factor as population density may be, it does not account for the lack of Japanese-equivalent speeds in population dense areas of the United States such as New York City. The real reason we don’t have such types of speed is because our government is unwilling to engage in the amount of public investment towards broadband infrastructure that European countries have engaged in. Instead, the government has chosen capitalistic regulatory policies (purportedly to create “open competition” which have definitely failed in that respect) which result in diseconomies of scale and disincentives to create infrastructures similar to those that exist in Europe and Asia.

American Broadband Is A Ripoff

Even more troublesome than our lack of bandwidth speed, however, is the price we pay for our second rate bandwidth. As seen in the section above, a small portion of the difference can be explained by the population density problem the United States faces. However, the true culprit for the United States’ overpriced bandwidth is, of course, the lack of competition that exists in the United States as opposed to Europe.

While the majority of broadband in Europe is provided via DSL which are owned by telephone monopolies, various European countries have essentially forced competition by requiring these monopolies to share lines and provide local loop unbundling. Ironically enough, this is very similar to the type of regulation structure seemingly intended by the United States Telecommunications Act of 1996, but which never came to fruition because of certain rules that never really allowed competitive wholesale prices to exist in the first place. While Europe diligently maintained the regulation of these telecoms, the United States quickly abandoned any true intentions of competition within the broadband market.

The results of this abandonment are exactly as one might expect. While Europe experienced a decline in average revenue per broadband connection between 2006 and 2007, the average revenue per connection in the United States continued to increase. This increase was directly the result of the typical duopoly in the United States comprised of the local cable operators and local phone operators. Such existence of a duopoly allows for minimal competition in the United States and places American broadband companies in a position that makes it far easier to maintain or increase prices than it is for their European counterparts.

This is not a sufficient explanation. You don't have the technology right underneath (no one can provide 50Mbps using DSL, for example, and you don't explain the difference between asymmetric and symmetric bandwidth, which is crucial) and your explanation of the regulatory and market situations is too glancing to provide real insight.

The Potential of an Accessible and Affordable Pipeline

Ultimately, unless the United States government makes a massive overhaul of the current telecommunications regulation infrastructure, the existing duopolies will continue to crush any sense of actual competition within the United States. Until very recently, courts have been all too willing to continue this regime of dominance. In April 2010, the 2nd Circuit Court of Appeals held that federal regulators power was limited and that Comcast was free to block or slow users' access to certain websites and possibly even charge users to get content more quickly from bandwidth intensive sites such as YouTube? . However, even more recently, the FCC has responded by outlining an internet regulatory scheme that splits access from content, a move that helps push the U.S. towards the mythical "network neutrality" (for those who believe in such a thing). While this is a small step for a broken system that will require many steps to fix, it is at least a step in the right direction.

This is not a coherent explanation of what's going on. Not having explained why "network neutrality" is mythical, you haven't explained what the FCC's regulatory outlook now actually is. You didn't identify the preceding duopoly theory correctly, or explain what limitations the FCC faces in moving away from it. Your exposition of European regulatory structure is too limited to be more than fanciful, and you don't explain Korean or Japanese regulatory or market settings at all. So we've got some observations about end results, some confusion about technology, some incommensurable observations on regulatory and market situations in the US, Europe, Korea and Japan, with hardly any real information about the latter two societies, and a generally accurate tone of pessimism overall.

Part of the difficulty here is that even a sophisticated explanation that was based entirely on studying and thinking about the bandwidth industries would be missing important context. That the US is a society of private wealth and public squalor is hardly news, at least since the publication of John Kenneth Galbraith's The Affluent Society in 1958. American infrastructure in all areas including transportation, energy production, education, health care, and telecommunications is poor compared to that in less rich and powerful societies. The bandwidth revolution is happening at a time when that discrepancy is accelerating.

Bandwidth distribution is inefficient under conditions of social inequality, like health care distribution. Using public resources to defeat inequality is not easy to arrange in an aristocracy, which the US has become. Trying to explain what is happening without reference to the larger context is hardly impossible: most social policy discussion in the US proceeds without any reference to the change in social systems spurred by rising economic inequality. But if you want to be clear about something complex in 1,000 words, using the large context to align the intermediate concepts and the evidentiary details helps.