Why is broadband more expensive in the US?

http://www.bbc.co.uk/news/magazine-24528383

by Libertatea • 12 years ago

45 62 12 years ago

bbc.co.uk

"We deregulated high-speed internet access 10 years ago and since then we've seen enormous consolidation and monopolies, so left to their own devices, companies that supply internet access will charge high prices, because they face neither competition nor oversight."

This should be a wake-up call for people who believe in the free market's ability to further low prices and good products. In reality it is often up to governments to prevent monopolies from forming and ensure that there is enough competition.

larrik• 12 years ago

A free market for companies that need to tear up every road in your town to lay their own cable is impossible (to say nothing of apartment and office buildings). Internet pricing and business has nothing to do with a free market, and likely never will. Deregulating them was asinine.

hga• 12 years ago

Bit worse than that, in that the telco monopoly starts at the Federal level.

But your point is well taken: claiming the actions of government established monopolies (actually duopolies when you're lucky) are a failure of the free market, and calling on these same governments "to prevent [the] monopolies [they created in the first place] from forming and ensure that there is enough competition" when same governments seem to be entirely happy with the results is ... well, I don't think we live in the same reality.

A bit more enlightened a government would at least have drawn a line at what these monopolies can do, i.e. keep them from competing with Netflix et. al., but that would be very problematic with cable companies.

dsr_• 12 years ago

http://www.alternet.org/story/148397/how_the_phone_companies...

Or, simply put, the incumbent carriers promised to put fiber to the home in millions of houses in exchange for deregulation; then they didn't fulfill their part of the bargain, because nobody was regulating them.

cones6882• 12 years ago

Or control the infrastructure on which it relies.

Here in the UK we have a wholesale company (BT OpenReach) which is strictly regulated that provides all telephone lines, providers can then "rent" off those cables. This allows for a massive variety of competition and broadband packages from £5 a month.

This also allows a funnel for the govt to invest if required, say laying fibre to remote communities rather than having to rely commercial interests to, who never would.

Nux4• 12 years ago

A massive variety of crap, mostly. The only thing that gets close to well connected countries in Europe is BT's Infinity. The rest are just pathetic ADSL offers or throttled-to-hell cable offers (Virgin, now UPC).

breischl2• 12 years ago

I know at one point the US had a somewhat similar arrangement for telephone lines. All the offspring of AT&T (ILECs in industry slang, Incumbent Local Exchange Carriers IIRC) were required to lease their lines to competitors. So someone could offer DSL internet and use the phone company's infrastructure to do it.

I don't know if that's still the case, I would guess so. But I don't think it ever applied to cable.

ryanSrich• 12 years ago

I think you're confused about the free market.

This behavior isn't, in anyway, an example of a free market economy. Local governments collude with large corporations to create these monopolies by subsidizing underground cable to only one or two corporations.

http://www.wired.com/opinion/2013/07/we-need-to-stop-focusin...

ihsw• 12 years ago

This is probably one of the most short-sighted and narrow-minded comments I've seen. The cablecos and telecos have carved America into fiefdoms where the result is neither free nor a market -- it is wholesale feasting on the American populace and our municipal leaders are happily complicit.

I could just as easily claim that political corruption is the source of ire, but I would be just as blind.

brewdad• 12 years ago

Yes. And the reason these fiefdoms exist is because they operate in a largely unregulated market. Companies make these agreements because they are in the company's best interests. Established market leaders don't WANT a free market. They want to set the rules themselves and in today's America they do.

jseliger2• 12 years ago

In reality it is often up to governments to prevent monopolies from forming and ensure that there is enough competition.

In the U.S. regulatory capture (http://en.wikipedia.org/wiki/Regulatory_capture) is often the problem, per this comment: https://news.ycombinator.com/item?id=7271044 . One reasonable alternative in the U.S. broadband situation is to allow municipalities to build their own networks, but in many states that's already illegal, per the linked comment.

pdonis• 12 years ago

the free market's ability to further low prices and good products

The fact that the Federal government de-regulated does not mean the market is free. State and local governments still regulate, not to mention making deals with particular providers, which is why there are so many local monopolies. In a true free market, something like Google Fiber would be deploying much faster than it is.

67726e• 12 years ago

The link above is more or less blogspam. Here is the full article it links to: http://www.bbc.co.uk/news/magazine-24528383

rikkus• 12 years ago

It says that more competition would drive prices down. Is there more competition in Korea, Denmark and The Netherlands?

I don't actually know; it'd be interesting to find out!

skrebbel• 12 years ago

In the Netherlands, cable providers are essentially monopolists in their areas. On ADSL and fiber (where that is available), however, there's about 15 competitors or so. So, seems like it does.

berryg• 12 years ago

Situation in The Netherlands is complex. There is competition between techniques, ADSL, Cable and Fiber. But realistically, ADSL is becoming too slow, fiber is still to expensive. And cable currently hits the sweet spot. But, cable companies are merging and basically there are now only two major companies who are talking with each to merge together. Thus creating an almost monopoly on cable.

batmansbelt• 12 years ago

Canada is not shown. If memory serves, we'd be worse off than USA.

Strange to depict Australia, but not Canada.

sp332• 12 years ago

Canada is between Austria and Hungary on the graph.

michaelvanham• 12 years ago

Canada is four spots above (cheaper) than Australia in the graph.

richbradshaw• 12 years ago

Glad I live in the UK - that graph shows why our internet is so amazing and so cheap!

seanalltogether• 12 years ago

I wonder which regulations in the UK allow for it to be so cheap. Where I live in Belfast, our only high speed internet option is Virgin, so it might as well be a monopoly as far as we're concerned, and yet we only pay the equivalent of about $30 a month for internet and +200 channels.

Maybe part of the tv license fee is going towards infrastructure costs?

exelius3• 12 years ago

No; it has more to do with the way that US cities are very spread out, how right of way must be established on a neighborhood-by-neighborhood basis, and as a distant third the lobbying / political power of the telecoms.

Nothing is really stopping new entrants from joining the market -- other than the fact that deploying a broadband network in the US is really, really expensive. In Europe or Asia you can much more easily obtain a license to run cable across a wide area encompassing a whole city; in the US those rights are split between dozens of different municipalities, some of which don't have the resources to approve requests.

Additionally, US telecom regulation requires that if you're going to cover a city, you have to cover the WHOLE city; or at least you can't discriminate based on income. This is why Verizon has slowed FiOS deployments to new developments only -- it's a way to be able to only roll FiOS out to wealthy customers. People in the ghetto don't buy broadband, but if you want to roll out in a US city today, you have to make it available to them anyway.

rayiner4• 12 years ago

Additionally, US telecom regulation requires that if you're going to cover a city, you have to cover the WHOLE city; or at least you can't discriminate based on income.

This is exactly why negotiations to deploy FiOS broke down in Wilmington, and why Verizon won't deploy to Baltimore. Wilmington demanded that Verizon build out to the whole city, even though almost the whole downtown is too poor to afford fiber.

shasta• 12 years ago

F'ing poor people...

3pt14159• 12 years ago

It kinda breaks my mind that the market has been so warped by BS like this.

rmc2• 12 years ago

So how come Ireland, a country in Europe, is in second last place? (There are 4 European countries below USA on the list).

Even Switzerland with is (a) much smaller and (b) considerably more wealthier than USA has worse broadband?

pi-err• 12 years ago

The exchange rate chosen in the comp kills the euro and CHF zones while benefiting £. I have been living in the UK, France and Germany - no chance that the UK pays less per MB than the 2 others who have among the best providers and networks in the world.

On the core of the issue: xDSL is favorable to homogeneously, densely populated areas. Fiber has a CAPEX that home usage can't monetize.

On a similar infrastructure depleted continent, Africa, one telco generation (wired voice/internet) was skipped and they have now a top 3G network. Way to go?

jseliger2• 12 years ago

Nothing is really stopping new entrants from joining the market -- other than the fact that deploying a broadband network in the US is really, really expensive

Actually, a lot is: Google "cable franchise agreements" or "city broadband franchise agreements" and you'll find that many if not most cities and counties either forbid or make prohibitively expensive real competition. Here is one news article about a lawsuit related to them: http://stopthecap.com/2012/06/19/court-invalidates-existing-... .

Many states are also passing telco-financed laws prohibiting local municipalities from creating Internet access as a utility. Examples: http://www.infoworld.com/d/the-industry-standard/big-carrier... or http://www.slate.com/blogs/moneybox/2013/12/30/municipal_bro... .

ipsin• 12 years ago

I live in California and was hoping to lobby my municipal government to bargain for better service when our cable franchise came up for renewal.

What I learned was that this bargaining power had been transferred to the state level in 1996. When I talked to those who'd been in charge of the process previously, they claimed the state CPUC served as a rubber stamp.

http://www.cpuc.ca.gov/PUC/Telco/Information+for+providing+s...

If you live in California, the CPUC is, theoretically, the organization you want to lobby. When I tried to get a roadmap for broadband expansion in my area, I did not have much luck.

exelius3• 12 years ago

Yeah, and laws like that are unfortunate (and likely to get overturned).

Franchise agreements exist specifically because the buildout costs are so high. Many locales place regulations on telecom companies (such as the aforementioned requirement that a company serve an entire city and not just the wealthy neighborhoods) but in order for companies to be able to be profitable under those regulations, they ask for a franchise agreement in return.

Google Fiber has so far been able to avoid these complications because they're picking and choosing their markets. They go after unencumbered markets where they can deliver service to only the wealthy parts of town (Austin being a great example -- anything inside the city limits is relatively wealthy while the less wealthy folks live in the far-flung suburbs. Kansas City is another; the poor part of town is in Kansas and the wealthy part is in MO and governed by a different authority.) I'm not convinced they'll ever go nationwide exactly because they don't want to deal with these complications.

jimwalsh• 12 years ago

It is really time for a big push in the United States to get Internet Access declared a Public Utility.

gonehome• 12 years ago

That's interesting (didn't know about the whole city coverage).

The general telecom issue is also gone over well in this talk called captive audience [https://www.youtube.com/watch?v=7R4xhwy-1oI]. It goes over the telecom industry, how it's not competitive and the current day incentives/problems.

While the underlying reason that this issue cannot easily be fixed appears to be related to a more fundamental problem with American campaign fundraising and how it creates a competing dependency that prevents any meaningful reform from moving forward. This Ted talk by Lawrence Lessig (http://www.ted.com/talks/lawrence_lessig_we_the_people_and_t...) gives a good overview of this problem.

at-fates-hands• 12 years ago

This a thousands times.

You can also add in the incredible expense to lay new fiber. Like you point out, you can't just lay it in certain areas, it has to be the entire city which is a financial multiplier which usually makes this an undesirable task for most companies.

We're still seeing the effects of the regional bell monopolies. They own all the copper and fiber. If you want to get into the game, you have to go through them and your margins are going to be razor thin unless you're willing to incur incredible overhead to dig and lay all the fiber yourself.

wil4212• 12 years ago

Some of those countries listed are smaller than the state I live in (area not population).

Also, I believe that in the US we have much higher data caps for home internet. My cap is 300GB a month from Communistcast I cant find the reference now but I remember reading about some places in Europe on giving something like 50GB a month. Sure you may have a faster connection but you will blow through your data cap faster.

Oletros• 12 years ago

I don't know any Spanish or Italian broadband ISP that caps the connection

wil4212• 12 years ago

Here is one instance for Germany starting in 2016: http://www.zdnet.com/deutsche-telekom-tweaks-plan-to-bring-i...

Here is British Telecom: http://bt.custhelp.com/app/answers/detail/a_id/10495/~/bt-br...

And finally here is a list on Wikipedia: http://en.wikipedia.org/wiki/List_of_cable_Internet_provider...

Thanks for picking two countries that dont have caps. I guess I shouldve been clearer.

sailfast• 12 years ago

Something I don't see addressed in many of the discussions around broadband (and a question I have) is how infrastructure already in place impacts the cost to provide faster service.

Obviously countries that skip the middle steps and go straight to, say, mobile phones without wiring up the country on hard lines have a better capability for less sunk cost. How much is this phenomenon impacting current US broadband? Are we still using crappy cable wiring from the 80s, or are we just being taken to the cleaners because we can? Appreciate anyone that may have more insight or experience taking a crack at the question.

breischl2• 12 years ago

We definitely have some problems with old infrastructure, particularly when you're talking about phone lines and DSL. Some houses still have really old lines running to them and even older lines inside them (I swear my previous house had phone cable from the 1940's). Tearing out and replacing all that stuff is quite expensive. This is sometimes called the "last mile problem." [1]

On the other hand, mobile phones are not a great analogy. Going straight to mobile allows you to skip digging up all the streets in town, but any sort of wired internet you have to put the wires somewhere. Putting in fiber right off the bat is certainly better, but you still had to do all that digging and installing.

[1] http://en.wikipedia.org/wiki/Last_mile#Existing_delivery_sys...

gdrulia• 12 years ago

Whenever there is article about internet prices I always see a lot of mistakes in calculations, question is just why? I am Lithuanian, living in London for the last 4 years. When I left Lithuania at 2010, you could have got 100mbps internet with unlimited traffic starting from £25 per month. Now you can get plan for same 100mbps internet for barely £12.5. Plus no contract, no traffic controlling, so you can keep your torrents 7/24. In the mean time in UK, I just last Summer finally got the upgrade to super old-school ~6mbps internet, now speeds reach 60mbps for a price ~£40 per month, and there is a regulation of traffic, so any weekend or evening internet can slow down for torrents.

In a nutshell at 2014 this what you get in UK vs Lithuania:

BT - UK: 60mbps > £40 > regulated traffic > plus contract 12/24 month.

Meganet - LT: 100mbps > £12 > non-regulated traffic > no contract.

rayiner4• 12 years ago

This chart is meaningless for several reasons.

1) It's well-known that U.S. providers achieve closer to advertised speeds than European providers. That's why the U.S. does way better in Akamai's tests of actual bandwidth than the OECD's study involving advertised bandwidth. The U.S. is currently 8th for highest average internet speed in Akamai's most recent state of the internet: http://www.akamai.com/dl/akamai/akamai-soti-q313.pdf?WT.mc_i... (see page 13).

2) It's not adjusted for price level in each country. Many things are cheaper in Hungary or Slovenia than the U.S. Internet service isn't a commodity good like an iPhone where everything is assembled in China. Internet infrastructure is put down and maintained by (often unionized) U.S. workers earning U.S. wages, and sold to customers also earning U.S. wages.

3) It ignores the cost of government subsidies: http://bits.blogs.nytimes.com/2009/03/12/the-broadband-gap-w... ("There are only a handful of major projects worldwide to build fiber lines to homes that don’t involve significant government aid of some sort, Mr. Burstein said, including Verizon’s FiOS and Iliad’s fiber network in some large French cities.").

rmc2• 12 years ago

(often unionized) U.S. workers

Some of the countries on that list (like France) have considerably more unionization and labour law than the USA

bestdayever• 12 years ago

US ISPs regularly get government subsidies. Hell they took 200 billion to start building fiber in 1996, then they didn't do it.

rayiner4• 12 years ago

First, the $200 billion number is a total fabrication. It was derived by projecting how much more profit telecoms made after deregulation in 1996 than they would have had as tightly-regulated utilities. It's not money actually invested. The states never had that kind of money to invest.

Second, to the extent that tax breaks, etc, were handed out, it wasn't combined with the kind of political will you see in European countries or Asian countries. In South Korea, wiring Seoul up with fiber is a politically tractable proposal. In the U.S., wiring New York and Chicago and LA up with fiber is a political non-starter. In the U.S., rural votes count about 2x as much as urban votes, so to the extent that broadband appears on the political radar, it's all about making sure people in rural Kentucky can get DSL, not making sure people in major cities can get fiber.

vixen99• 12 years ago

Slightly off topic but I wonder why Romania was not included seeing that it's often quoted as having the fastest and cheapest internet in Europe.

http://www.bne.eu/story5565/Romania_ranks_first_in_CEECIS_fo...

Fuxy• 12 years ago

Lol. Wonder why they never bothered to put Romania on this cart. Is it because they have the best prices (1) at the moment?

[1] http://www.rcs-rds.ro/internet-digi-net/fiberlink?t=internet...

If you were wondering yes 60RON is about £12.

kellros• 12 years ago

South Africa would have made that chart look totally out of proportion :) I believe 1Mb/s is going for around $35-$60/month

ck2• 12 years ago

In many US cities, internet is a duopoly, so everyone is squeezed.

My ISP raises its price $5/mo every year.

I pay $50 for 5mbps with 100GB monthly cap.

Five years ago it was half the price.

They are making a killing.

crazy1van• 12 years ago

This article doesn't live up to the title. It is just a chart of prices followed by basically "because monopolies" with nearly no supporting evidence.

Why is broadband more expensive in the US?

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