A new study from the New America Foundation suggests that the United States is lagging in the broadband speed race. The study compared high-speed Internet service in major cities around the world, and found that high-speed broadband service was dramatically more expensive and slower in the United States than in leading countries outside the United States. The authors blame these disappointing results on bad public policy.
International telecommunications comparisons are difficult, because broadband service is a complex, non-homogenous product. Broadband services can offer different speeds, data caps, prices, and reliability guarantees. Typical speeds may be much lower than average speeds, and some companies offer customers substantial discounts over their standard prices. And things get even more complicated when Internet access is bundled with telephone and television services.
High prices, low speeds
The New America Foundation used three different methods to try to cut through the clutter and come up with fair comparisons. First, they looked at the cost of basic "triple play" bundles—phone, video, and Internet—in various countries around the world. They attempted to make the packages comparable by choosing the cheapest service in each category: only basic television service and the slowest available Internet speeds. They then ranked 57 different cities based on the price of this basic triple-play package.
The results didn't look good for the United States. The most expensive city surveyed was New York, where Verizon charges $154.98 for the cheapest fiber triple-play package. All the American cities considered were in the bottom half of the ranking. AT&T offered the cheapest triple play package: $65.60 in Lafayette, LA.
In contrast, Riga, Seoul, and Paris all offered triple-play packages for less than $40 per month. London, Amsterdam, Berlin, Copenhagen, and Hong Kong all had triple play packages available for under $50.
Next, New America focused on stand-alone broadband service, looking for the fastest connection available for around $35 per month. The best-performing American city was San Francisco, where Webpass offers a 200Mbps service for $37.50 per month. New Yorkers and Washingtonians can get 25Mbps service for less than $40 per month, while Los Angelinos only get 10Mbps of downstream bandwidth for $29.99.
With the exception of San Francisco, these speeds are way behind the world leaders. A Hong Kong service provider offers 500Mbps service for $37.34 per month. Providers in Tokyo, Riga, Seoul, Paris, Bucharest, and Berlin all offer services with 100Mbps download speeds service for less than $40 per month.
Finally, the study looked at the fastest Internet connections in the world. Here, the United States had a surprise champion. Residents of Chattanooga, TN, can get gigabit Internet access. Unfortunately, that service costs $317.03 per month. Verizon offers 150Mbps service in New York for $159.95 per month, and Comcast offers 105Mbps service in Washington, DC, for $105.00.
Several other cities offer comparable speeds for much less money. In Hong Kong, you can get a gigabit connection for $48.59 per month. Amsterdam offers a half gigabit for $83.33 per month. Tokyo residents can get a symmetrical 200Mbps connection for $26.85 per month.
Verizon responds
Unsurprisingly, Verizon argues that New America isn't making apples-to-apples comparisons. "While we understand a desire to attempt to benchmark US broadband and communications services packages, such studies simply do not accurately reflect the products and services that are offered, consumer demands or expectations, or the competitive realities of the countries or regions in question," a Verizon spokesman told Ars by email.
Verizon pointed to an ITU study that suggests that US providers are doing a good job of providing affordable "entry-level" broadband to consumers.
A company spokesman also argued that it's difficult to do an apples-to-apples comparison because the "basic" television bundle differed from country to country. He noted that Verizon offers "distinguishing value-adds" like video on demand that may not be available in the basic cable television package in other countries.
Finally, he noted that the ultra-fast speeds touted in the New America study are only available in geographically limited areas. He pointed to Hong Kong as an example. "The company itself says that it does not guarantee that speed outside of the city and in fact it is more like 20 megs outside of Hong Kong," the spokesman told us.
"Really flawed assumption"
The New America Foundation's Benjamin Lennett didn't dispute that point. "We only looked at cities," he told us in a phone interview. The problem, he said, was that incumbents in the United States don't offer ultra-fast speeds even in urban areas whose high density ought to make them cost-effective.
What can be done to improve America's broadband performance? Lennett told Ars that the first step is to recognize that there is a problem. He argued that broadband policy in recent years has been based on the "really flawed assumption that telephone companies and cable companies are going to compete with each other." Instead, he said, we've gotten a "negotiated truce" in which cable incumbents enjoy a de facto monopoly on high-speed broadband service, while Verizon and AT&T focus primarily on their wireless platforms. "The consumer is going to lose from that," Lennett said.
Lennett suggested two policies that might rejuvenate the US broadband market. First, he suggested that policymakers should re-evaluate the 2005 decision to abandon line-sharing rules. In many other countries, incumbent firms are required to lease their facilities to competitors at regulated rates.
Second, Lennett argued that more cities should consider municipal fiber projects. The study included three small cities—Chatanooga, TN; Lafayette, LA; and Bristol, VA—that have built city-owned fiber networks. Although those networks are not offering dramatically lower prices than the incumbents, they are providing some of the nation's fastest broadband speeds. And Lennett suggested that they would be able to cut their prices once they've paid off the costs of initial construction.
Verizon has a point that international broadband comparisons can be tricky. The overwhelming majority of the world's residents don't live in the few dozen cities New America chose for its study, so it's important to interpret the results with caution. But even if we assume Verizon is right that the United States isn't doing as poorly as the New America suggests, the study is nevertheless another piece of evidence that the United States no longer leads the world in broadband deployment.
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