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Why Is Broadband More Expensive In the US Than Elsewhere?
mrspoonsi writes "The BBC reports "Home broadband in the US costs far more than elsewhere. At high speeds, it costs nearly three times as much as in the UK and France, and more than five times as much as in South Korea. Why?...'Americans pay so much because they don't have a choice,' says Susan Crawford, a former special assistant to President Barack Obama on science, technology and innovation policy. 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."
The telco lobby writes the legislation.
America is the home of capitalism, which means competition, which drives down prices and raises standards. The rest of the world is a socialist hellhole.
It's similar to what the North Koreans believe, with a touch of stockholm syndrome.
People will pay whatever is charged up to the point that the market will bear. It's not that far off from an unregulated utility at this point. Television content delivery has similarly pulled their prices up through the roof, because people will pay it.
I haven't paid for either service (at least intentionally) since 2009. Under the right circumstances I might be persuaded to get the broadband again, but not cable or satellite television.
In SOVIET RUSSIA... erm...NSA AMERICA, the Internet logs onto YOU!
1. Where I live we do have choice between carriers, and it is not even a big city. 2. When I was in a densely populated area, Northern VA, we had choice too. Deregulation to allow competition causes monopolies? No, does not compute. Regulation creates barriers to entry that leans to monopolies or few providers, those who can get the government to protect their territory with police power. ATT was a national monopoly only until the feds allowed competition. Your local utility is only a monopoly as long as your local government makes them one, same with your cable provider, etc.
Time Bomber the Book coming soon.
to buy a congressman than to build a better business. To all those you think America is a free market, go fuck you ignorant self then read up on Mussolini's definition of fascism.
Much like healthcare, most Americans don't have a real choice. I would pay less and get better healthcare and faster internet service if I could.
Why is this? I would guess that it's probably due to monopolies taking advantage of regulations to make competition stay away. Also probably in part to people wanting to watch specific sports and shows, and only being able to get them though one of the major cable/satellite networks. Shows like that are going to be hard for a startup internet company to replicate. Things like piracy, netflix, and itunes alleviates some of these problems, but a lot of people still prefer to get their games live.
There is no oversight in clothing market and yet you can buy a shirt at Wallmart or Ross for $5 or shoes for $10. Why don't they charge $100 for a shirt and keep the difference? It is not government oversight that drives prices down but competition. Telcos are not a good case study of either free market or regulation as they are a special case in a lot of ways.
Negative moral value of force outweighs the positive value of good intentions.
So, the conclusion is de-regulation is bad for consumers, but good for businesses.
Gee, I'm shocked. De-regulation basically is carte blanche to screw over your customers and not be accountable to anybody.
The whole mentality of "it's good as long someone is making profit" will be the death of us.
The 'free market' is a lie, and it always has been. Consumers don't have perfect information, and corporations will lie cheat and steal to improve their bottom line.
That de-regulation would ever improve anything for consumers has always been a big lie.
Lost at C:>. Found at C.
Once Upon a Time in America
Cheap communications has changed our society more than any other of our inventions and it has removed more tyrants from power than any weapon. Let’s take another step into the history books, back to May 1st, in 1844. Alfred Vail, working with Samuel Morse, was setting up the first telegraph line, and on that day sent the world’s first ever electronic message down the 24 miles of cable that were working, from Annapolis Junction to Washington D.C., to report the results of the Whig Party presidential nominations (Henry Clay won that nomination, and lost the subsequent election).
Just a decade later in 1855, the New York and Mississippi Valley Printing Telegraph Company and the New York & Western Union Telegraph Company merged to create Western Union. One assumes new-york-and-mississippi-valley-and-western-union-printing-telegraph-company.com was already taken by domain name squatters.
By 1900, Western Union operated a million miles of telegraph lines, and by 1945 it had an effective monopoly over the US market. As the New Yorker wrote, monopolies make spying easier. It is an easy and obvious trade: the government allows, by inaction or by intervention, a powerful telecommunications company to become dominant in a market through mergers and acquisitions. In return that company provides the government with surveillance.
The New Yorker explains how Western Union used its monopoly to serve those in power:
It is quite visible how cost gravity drove communications down from an experiment for the wealthy to a mass market product so cheap even Western Union couldn’t make profits from it. By 1980 its telegraph business was dying, and the old Western Union business was finally closed in 2006, after 151 years of operation. The name was, as we know, reused for a financial services company which today enjoys a government-sanctioned monopoly.
Curiously, Western Union’s long telegraph monopoly seems to have had only a small impact on the size of communications networks. If cost gravity was operating fully, at 29% a year, and telegraph costs were in free-fall, there would have been 37M miles of telegraph by 1900. Instead, assuming Western Union had half the market, there were 2M miles. That is a factor of 16 over 55 years, which is not much, and a part of that can be accounted for by quality improvements.
I’m also not sure what to do with the random figure of 113 million kilometers of fiber optic cable produced in 2010. A cable is a bundle of fibers, and the traffic rates are rather higher than Western Union’s old stock. Has cost gravity been working?
One smoking gun pointing to a century and half of cost gravity being hijacked by telecoms monopolies back through AT&T and Western Union is the cost of the modern equivalent of a telegraph, the text message.
My blog
The picture you paint of Europe is a little simplistic too. France has a few large cities, but the tenth-biggest one has less than half a million inhabitants. It has tens of thousands of villages with 1000 or less inhabitants. And you get a choice of cheap ADSL provider in most of those small villages.
Virtually serving coffee
Yes, yes - it's a "natural monopoly", we get it, you studied economics in college.
This whole thing could be fixed by changing the model from "pay to access" to "pay to use".
The US considers the infrastructure a fixed resource - fixed radio bandwidth allocated to certain players, fixed easements given to certain players, and so on. When you have a fixed resource, you have high access fees and discouraged use: multi-year contracts, high monthly bills, data caps, throttled access, poor/no connectivity with no guarantee, and so on.
In a "pay to use" model, the government would mandate a fixed maximum charge per gigabyte of usage. Companies with a fixed resource could increase profits only by encouraging more usage: deploy newer and faster technology, connecting more people, encouraging high data-transfer activities (netflix, et al.), and so on.
Such a change wouldn't even affect the existing players: take the total cost of internet access and divide by total internet usage to come up with a fee per-gigabyte that would give the same income next year as they get with the current system.
The difference being, now they have an incentive for service, instead of an incentive for rent-seeking.
All that extra hardware to spy on US citizens, that cost has to be passed on to consumers. Probably why it's hard to get fast speeds too, you have to wait till the gov upgrades their backend to handle the extra workload of everyone on faster links; when they get their new spy gear in, you get another 5mb.
Waiting for an amusing sig.
The big problem is that we deregulated the cable and phone companies, but we didn't remove their monopoly agreements and we didn't enforce any regulations barring them from entering into non-compete agreements. So you end up with a situation like where I live, where Cox Cable isn't subject to regulation regarding rates, services and quality, etc. but at the same time no competing cable company's allowed in (because Cox still has an agreement with the city making them the only cable company allowed to run cable on the public right-of-way), the city attorney routinely enforces that agreement (taking legal action when one of the two cable companies in the area tries to provide service in an area assigned to the other, even when that other company isn't actually providing service in the affected area), and there's an agreement between Cox and Time-Warner (the other company in the area) not to offer service where the other's already providing it. End result: all the downsides of a monopoly combined with all the downsides of completely-unregulated services. They can do whatever they want with rates, there's no legal basis for challenging them, and there's no competitor you can switch to. To fix the problem we have to remove this pseudo-deregulation: either they're fully deregulated and not allowed to bar competition from entering the area, or they've got a monopoly on service and are subject to regulation as a public utility.
There's your tax-subsidized patent-owned-by-public answer.
Capitalism drives down costs.
Mercantalism, which Adam Smith, the father of Capitalism railed against, provides large players with greater rewards for inefficiencies propped up by people who claim to be Capitalists, but depend on the lack of competition to win them billions.
-- Tigger warning: This post may contain tiggers! --
It is worse in the US than in Korea. But Canada also has bad Internet. South Africa has some slow speeds and usage caps. Also Australia and other countries.
We're neither the slowest nor the most expensive.
When all of the internet is being filtered through five or six main providers, it is easier for the NSA to funnel all of the information into its data analysis machines. Can you image the headaches the NSA would have if all the little mom and pop companies (if they were still around to do internet), would not provide for a free backdoor to the operations...
Not really. All they have to do is put their taps on the backbone servers. Since everything is routed through them, they see everything.
Understanding the scope of the problem is the first step on the path to true panic.
US broadband is more expensive than a few countries.
Also the available speeds vary widely as well. The US has a decent speed overall. Given that a significant amount of content is available in the US. The real world speed in the US is significantly better than other locations around the world. See: http://www.netindex.com/
Lets also factor in region locking of content. The US generally does not suffer from the issue. Other regions around the world are simple blocked from content due to the region they are in. Again the US is at a significant advantage here.
There are a lot of other countries that are a hell of a lot more expensive than the US. Case in point a first world country Australia.
Overall the Internet experience in my humble opinion in the US is vastly superior to most other locations around the planet.
Now lets also factor in penetration of broadband and average household income. The US fairs very well indeed when you start to think about these factors. However the US is still behind some notables. Korea for some time still be the bench mark that other countries try to achieve on all fronts. Other countries are embarking on plans to significantly improve speed, bandwidth, and costs.
This article should have been about. If the US doesn't do anything to upgrade it's aging internet infrastructure it will soon be one the the most expensive and poorest performing broadband countries in the world.
In a truly deregulated market, cable companies would split the markets to maximise profits.
FTFY.
Yes, I'm left. You have a problem with that?
No, In a truly unregulated market the barriers of entry would be higher for new entries into the cable market. It is one of the justifications used for regulating cable.
Look up the term “Natural Monopoly”. In any industry with high fixed costs and low marginal costs market structure will favor only one provider. If a challenger faces an incumbent, the incumbent will just drop prices until they drive out the challenger. They don’t need to pay for the high upfront capital costs – they have already done so.
And while it is a valid reason to regulate I am not saying the cable companies haven’t captured the regulators to entrench their position – they have.
Natural monopoly is a myth. A city could bury conduit under its streets and charge a reasonable rate for pulling copper or fiber.
Then why aren't prices lower in NYC? In areas of high density, the prices aren't any better, even when small regional providers target the lucrative markets.
Learn to love Alaska
Yes, the government does infrastructure really, really well.
Anything where the service can't be created by anyone.
Infrastructure is pretty much always cheaper for the consumer when the government does it becasue they aren't using it as a monopoly to boost profits. It's run a 0 +/-2% or so.
The Kruger Dunning explains most post on
Why is Broadband more expensive?
Why do we pay more for healthcare?
Why is our productivity so high compared to real wages?
Why does our government spy on us and disregard our civil liberties?
Why are we below the average in ability according to OECD?
Why is the gap between the richest and the poorest on par with that of African countries?
And finally, why the fuck do people keep telling me this is the greatest country on Earth?
I want to be proud for my country and what it stood for, but it's hard to see nowadays.
I am French and I currently live in Arizona, and your logic seems a little bit bad because YOU DON'T NEED TO PUT CABLE/FIBER TO EVERY METER SQUARE IN UNINHABITED LAND. You just don't need to have fiber to every stone in Grand Canyon or Monument Valley but you DO NEED TO HAVE IT in Phoenix, Tucson, Flagstaff, etc.
The population is clustered in such a way that it is easy to connect them.
Yet :
For 20Mbps here (in the center of a 500K inhabitants city) : 56$/mo (that's without TV or phone).
For 25Mbps in France (in the center of 20 houses village, 3Km away from a 8K inhabitants city) : 49.71$/mo (which also includes free and unlimited calls to more than 100 countries and cheap mobile phone plans (2hrs voice, unlimited text)).
...broadband. One guess who lobbied heavily for those laws.
Never let a lack of data get in the way of a good rant.
What I got out of the Mises article was that much of the mess that utilities are in comes from cities' failure to set an efficient price for access to the rights of way that it owns: "Benevolent and enlightened politicians, even ones who have studied at the feet of Harold Demsetz, would have no rational way of determining what prices to charge." I recognize that it'll be impractical as of now for cities to give up their ownership of rights of way, and instead, I set forth a technical solution that a city could put in place to allow more efficient access to its rights of way by competitors without disrupting travel.
$20 for broadband in the US?! Where? I can get very crappy(Netflix basically unwatchable) dsl for $30, or cable for $60.
Never let a lack of data get in the way of a good rant.
That's ridiculous. I used to install pipelines and wells beneath roads in southern California. That's a much slower and messier process than laying underground cables (I know because we did that too). Believe me, the residents did stand for it. To them it's just more road work. It would be easy for a company to lay new subterranean cable, and it would be even easier to place it above ground.
Sometimes the invisible hand flips you a quite visible finger.
http://en.wikipedia.org/wiki/Nash_equilibrium
there is no reason an ogilopoly has to achieve the maximization of global utility
In the US telco companies are required to lease their plant at wholesale rates to competitive exchange carriers. This deregulation is what gave us unlimited long distance and voip. In most areas of the country DSL that can be leased on a wholesale basis is quite slow based in technology issues. CLEC's are mostly stuck buying bare wires from the customer premise to the local telco exchange, putting the loop distance in the ADSL range. They have kept CLEC's out of their VDSL and fiber products due to how the telco deregulation law was written. If we want faster broadband we need to modernize the telco deregulations to include cable companies and vdsl/fiber products. There is no reason who comcast can not lease several blocks of 12 channels to competitors on a wholesale basis to run docsis 3 over. Comcast and other cable co's are very inefficient with their bandwidth and with SDV and an all digital cable system there should be no issues.
But in France we had the most expensive Mobile Phone Bills in the world. Because the major companies made an confidential agreement to not change their prices.
And then another company entered the game, and now we have very low mobile phone bills.
It's the same company who several years ago made the ADSL prices drop:
http://en.wikipedia.org/wiki/Iliad_(company)