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."

Comments

Telco oligopoly

[jhill000]

The telco lobby writes the legislation.

Re:Telco oligopoly

[girlintraining]

The telco lobby writes the legislation.

Nope, but you're half-way there. The problem with the United States is that, well... States. In most other countries, if you want to run cable, utilities, etc., you go to the federal government, get your permit, do whatever environmental impact studies need done, and be on your merry. But here, you have to deal with municipalities. Thousands of them. And that opens the door for exclusive contracts; Which are typically for 10, 20, even 50 years. And it goes to one company. One. For an entire town. For 50 years. They didn't write any legislation, they just took advantage of how our government was organized. It's a glitch courtesy of our Constitution.

The other half of the equation though, and one most people forget, is that the United States is big. Like, really big. Like, it could fit all those other countries mentioned inside it and still have space left over for dessert. Low population density is what fucks us, even more than the above-mentioned which, while bad, can be fixed by law. You cannot shrink a landmass down to a more maintainable size.

Roads, water works, electricity, cabling... all of it, we need more. A lot more than say, Japan would. In Japan, people are packed in like sardines. There are parts of this country where you can watch your dog run away for three days it's so flat and barren. But it still needs cabling run across it.

We are, in a very literal sense, a victim of our own size. No fat american jokes though please.

Re:Telco oligopoly

[LurkerXXX]

We like our internet service like we like our medical service.

Way overpriced do to large companies owning congress.

Re:Telco oligopoly

[0100010001010011]

Low population density is what fucks us, even more than the above-mentioned which, while bad, can be fixed by law. You cannot shrink a landmass down to a more maintainable size.

This is a horse shit excuse and I'm tired of hearing it. Why doesn't the Northeast megalopolis have cheap internet? It has a population density of 360 people/sq km

How about all of the 'mega regions' of the US? http://en.wikipedia.org/wiki/Megaregions_of_the_United_States

Why don't the east and west coasts have high speed rail, good cheap internet, etc.

South Korea is on a peninsula with a country stuck in the 70s to the north. Yet they have great internet. Their population density isn't that much greater than the North East megalopolis and much closer than say Sweden, Norway, Finland. All of which also have great internet. Denmark density is a 1/3 of the north east and I was still getting 1 Gbps in my hotel.

Re:Telco oligopoly

[akinliat]

Except you can't blame municipalities for the cost when they're pretty much the only part of government that's been trying to provide low-cost access. Many municipal governments have tried to set up as ISPs for their citizens, and the costs are typically far lower than what you see from the cable/DSL duopoly. They've been lobbied and sued and otherwise lawyered to death for the effort, but at least they're trying.

And while you can't fix size, you don't really need to. Most of the long-distance fiber backbones have already been run, and most of the US population lives in urban or suburban areas. The bulk of the land area of the US is rural, and they may not get cheap broadband anytime soon (it literally took an act of Congress to get them electricity and telephone after all), but they're a pretty small minority.

Re:Telco oligopoly

[Penguinisto]

How come the invisible hand of the market doesn't spank the telcos for their impudence?

Three words: Right Of Way.

Most cities/towns don't want to have their streets clogged up with wiring, so they limit what they lease out for rights to put in wire/cable/fiber, or worse, auction it off. Thus the number of competitors is pretty limited. This in turn creates a nasty little duopoly/triopoly in most areas, with one provider on cable (Comcast/Time-Warner/Charter), one on DSL (CenturyLink/Frontier), and maybe one for fiber if your locale is lucky enough to have it. Some areas also have wireless broadband as well, but nowadays that's as rare as fiber.

Either way, the result is a "stable" market of regular price hikes where the consumer has no incentive to switch... I've only seen one exception, when Charter moved into the rural Oregon coastal area where I lived - I saw my broadband cost go down from CenturyStink's $70/mo for 3mb/sec, to Charter's $30/mo for 30mb/sec (which I suspect will remain that way until Charter takes over enough of the region.)

Given the lower population density overall for the US (but not average, mind), the initial cost for competition coupled with reluctance from town/city/county officials to grant right-of-way (or worse, watching them action off or sell right-of-way for astoundingly high prices), means you the consumer are, well, screwed.

Throw into the mix is the intensive and money-rich lobbying efforts by existing telcos to prohibit any worthwhile competition or muni-owned infrastructure, and you have a shit situation overall, no?.

Re:Telco oligopoly

[epyT-R]

Because the state interferes by granting monopolies over land rights for cabling and radio spectrum.

Re:Telco oligopoly

[mcrbids]

Hrm... Seoul is a city, not a region. New York City's population density is about 10,630/km sq and Manhatten is about 25,846/km sq.

Your argument needs more argument, I think.

Re:Telco oligopoly

[Archangel Michael]

Girlintraining almost has it right. While we are not socialistic and have a government being a good big brother to us, we are pseudo-Capitalistic with the worst part of both Socialism and Capitalism in force. If we had a REALLY free economy, the problem would be solved quite quickly. The problem is, we don't have a friggin clue how to solve the problem infrastructure.

My solution would be to build out via a BOND measure, Fiber to the house/apt/business. Back haul it to a central facility or neighborhood closet, I don't care. Pay a guy to manage connecting Address A to Service Provider B in the closet, where Service Provider B is the company that Address A contracts service through. Allow for a certain number of Service Providers, via auction, to be able to install their CO-LO equipment in said facility, use that auction pricing to pay for the person in the closet connecting Addresses to Service Providers (or other means).

The Municipality would build out the FIOS infrastructure plant, not giving "franchise" rights to any single player. This would provide EACH Address the opportunity to buy whatever services they actually need from whomever they actually like. Bad Players would leave the marketplace, new players come in with compelling products that shake up the marketplace.

The Infrastructure would have to have a service fee for maintenance, based on usage of the FIOS plant. More expensive plans (tax on Service Provider plans) would pay a higher "service fee" and no fee would be charged for people who opt out.

If this were setup this way, the build out would be contracted, to bring FIOS plant to each Address/dwelling/Apt/Business, a bond measure would be the easiest means to achieving this build out.

This would give Comcast, Verizon, AT&T, and any other company access to every Address in the municipality via what is essentially "dark fiber". And the is no known downside, except for those companies.

Re:Telco oligopoly

[reve_etrange]

No one questions that its more costly to supply infrastructure to rural areas. The question is why that excuse is at all relevant to American cities. My connectivity, in an urban area in a technological center of the country, is piss poor and extraordinarily expensive because Comcast has an effective monopoly.

In addition to their price setting ability, Comcast has no incentive to systematically increase network capacity. Instead, they use incremental upgrades made in the course of necessary maintenance to provide new introductory offers while locking in existing customers at lower and more expensive tiers. I tried to find out recently if I could upgrade to a higher service tier - and the answer was no. Even though I'm on the lowest tier (15 Mbps @ $50/mo) and am an existing customer, they will only "offer" me new subscriber packages for which I am not eligible.

Re:Telco oligopoly

[girlintraining]

Girlintraining almost has it right. While we are not socialistic and have a government being a good big brother to us, we are pseudo-Capitalistic with the worst part of both Socialism and Capitalism in force. If we had a REALLY free economy, the problem would be solved quite quickly. The problem is, we don't have a friggin clue how to solve the problem infrastructure.

Infrastructure that depends on right of way to land creates a natural monopoly. I don't feel going laisse faire would accomplish anything. If you remove government control and hand over access to private citizens, you will amplify the problem a thousand-fold; Everyone between point A and point B will want a cut, and not everyone will be willing to offer access at a reasonable rate. This is why you have easements and eminent domain. Our current system places right of way in the hands of municipalities, which often offer exclusive contracts and can also be bullied or bought off in ways that the state or federal authorities cannot.

You cannot have a 'free' economy when you're dealing with a natural monopoly. Even Adam Smith in Wealth of Nations said as much about land ownership. It must be owned or controlled by the government, or you get situations exactly like this; Profits increase because the fixed costs remain constant but demand is ever-increasing. Telecommunications is the classic case of a natural monopoly. You would be hard pressed to find a better example!

Probably Obama. Or the Tea Party.

[isorox]

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.

Re:Probably Obama. Or the Tea Party.

[Moryath]

Precisely this. The illusion of "choice" and "capitalism" is strong in the USA.

Then you get down to the nitty gritty.

In the town I live in, precious few grocery stores aren't the HEB brand. There is no real competition for them and they gouge.
In the neighborhood I life in, I can't get FiOS and the AT&T DSL options are a joke (they won't bother putting in capacity). So if you want anything but *shudder* dialup, your options are Warner, Warner, or... Warner. Zero competition, price gouging accordingly.

The communications market is so "deregulated" that monopolism takes over, with deliberate barriers to entry placed by noncompete agreements and dirty tactics. And yet so many people think anarcho-libertarian, "laissez faire" deregulation will somehow make their lives better in every aspect.

Re:Probably Obama. Or the Tea Party.

[Crazy Taco]

The communications market is so "deregulated" that monopolism takes over, with deliberate barriers to entry placed by noncompete agreements and dirty tactics. And yet so many people think anarcho-libertarian, "laissez faire" deregulation will somehow make their lives better in every aspect.

That's not true at all. Try opening up a new cable company in your local town, or opening up a new power plant and running new wires to all the houses. Oh, that's right, you can't, because the government has decided that it would be inefficient to have more than one set of power lines, or water lines, or cable lines, or telephone lines, etc, going into a single home. So they allow one provider to service the whole town and be a government sanctioned monopoly. That's hardly "deregulation"... in fact, it's the epitome of the government regulating and controlling everything.

Re:Probably Obama. Or the Tea Party.

[icebike]

Its more a matter of practicality than regulation.

Nobody would stand for yet another cable company trenching through every neighborhood laying new wire or fiber. Even if they wanted to, they couldn't afford it. The only way this gets done is when the neighborhood is built, and there is nothing to disrupt, and not sidewalks or driveways are laid yet. You can trench, pipe, and pedestal a hundred home subdivision in an afternoon and leave it to the home builder to cable each house to the pedestal. Comcast or Verizon will jump at the chance to do that because it means a lot of customers are locked in.

When you build a subdivision, you typically deed the streets, waterlines, sewers, to the city/county at the end of construction.
Its long past time to stop subcontracting the bandwidth job to the Telco/Cable companies and make the subdivision contractor put that in
and deed that to the city as well. Yes it raises home prices.

Re:Probably Obama. Or the Tea Party.

[Mitchell314]

'Inefficiency' has little to do with why governments regulate and limit utilities. The biggest is safety; there used to be a time when there were many competitors for power supply and the combined distributions systems were incredibly dangerous. Not to mention a horrible pain to track and maintain for the companies and the technicians. There are also big issues with the legalities of easements, as well practical and technical problems. The market is very unlike common commodity markets.

Re:Probably Obama. Or the Tea Party.

[Jane Q. Public]

"you can't, because the government has decided that it would be inefficient to have more than one set of power lines, or water lines, or cable lines, or telephone lines, etc, going into a single home."

This all actually fits together. The glue that makes it all stick (or rather, fall apart) is regulation under FCC Title II. At the risk of oversimplifying, it went something like this:

In the early telephone days, the U.S. saw that multiple competing, and usually incompatible, telephone systems wasn't working well. It decided to allow one highly regulated monopoly to build our countrywide telephone infrastucture. In exchange for allowing it to operate unchallenged, it had to live with certain regulations, as a common carrier under FCC Title II.

There are certain strict regulations that apply to Title II common carriers. Among the rules are, in no particular order: (1) the carriers cannot supply content, they can only carry content (telephone conversations, internet packets) created by others. (2) A common carrier cannot intercept communications, or allow communications to be intentionally intercepted, without a warrant. There are other rules, too, but those are the two important ones for the moment.

As a result of having a single, unified infrastructure, at the time the U.S. phone system was the envy of the world. This telephone monopoly was eventually broken up (the reasons are beyond the scope of this summary), but telcos still have to live by common carrier rules.

Then along came cable TV. Back when it started to become apparent that cable could also be a good medium for internet communication, the cable companies (which were already fat from cable TV profits) lobbied Congress to specifically pass a law saying Title II (common carrier) regulation would not apply to ISPs.

The result is what we see today: ISPs can legally intercept your communications in various ways, cable companies can supply content AS WELL AS carry communications (the possible negative consequences of this should be obvious), and they have had huge mergers and developed monopolies because they are not subject to the same sane regulation as the telcos were (are).

The point being this: in countries where the common communications backbones are required to allow sharing by competitors, internet service is faster and cheaper. That is true competition. What the cable companies in the U.S. are calling "competition" really isn't.

Free-market capitalism is not always the best answer, when it comes to common public services, utilities, etc. And it is becoming increasingly obvious that it hasn't worked for cable in the U.S. [But note: lobbying Congress is not "free market capitalism", either... so it's kind of a moot point in this particular instance.]

Re:Probably Obama. Or the Tea Party.

[AK Marc]

Why is there no competition for them? Is there something stopping another chain from opening a store and charging slightly less and taking all their customer?

Yes, the cost of setting up a new store. That's a significant cost, and if you did do that, they'd drop their prices. I've seen where stores have waited until a competitor bought land near them, then they dropped their prices significantly. The land was sold by the competitor because it was no longer profitable. Then the prices went back up. The monopoly bought the land, making money from their competitor, then developed into something that could never compete with them (offices, rather than retail), then sold it to a property management company, ensuring nobody could get an equivelent piece of land at a reasonable price for miles around them

There are many ways for monopolies to abuse the marketplace without directly manipulating it.

Re:Probably Obama. Or the Tea Party.

[jonbryce]

In the UK, there is one set of electricity wires in the street, one set of gas pipes, and one set (or sometimes two sets) of telephone cables.

The owner of the electricity wires, the gas pipes, and except in Hull, one of the sets of telephone cables, is required to make them available to other suppliers at a regulated price. That means I can choose from many different people to supply my gas, electricity and telephone.

Deregulated = Monopolies?

[Austrian Anarchy]

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.

Re:Deregulated = Monopolies?

[petes_PoV]

Your local utility is only a monopoly as long as your local government makes them one

The problem in the USA is that pressure groups, whether industrial or commercial have no counterbalance. The wrong sort of regulation stunts growth and competition. However zero regulation turns a free market into survival of the fittest with that survivor killing off the rest. Neither situation is good and a regulator who is able to stop consolidation and monopolies would act in the interests of the consumers.

That's what happens in most countries and it's what keeps a competitive market operating. The USA has allowed its corporations to become too influential and too powerful.

Re:Deregulated = Monopolies?

[gstoddart]

Only in socialist fantasy land.

In the real world, there's always a smaller, smarter, hungrier competitor, so the most politically-connected company gets the regulators to write rules that keep them out of the market.

Horseshit.

In the real world there's always more large corporations willing to try to get the regulators to set up special deals for them.

In the real world, if you didn't have regulation, you would still be having babies die of being poisoned by melamine laced formula from China.

As long as there's an advantage to be had and profit to be made, there's always going to be things companies will do to maximize their profits which directly harms other people. If there's no regulation, there's no consequences.

The market as so often gets pitched to us is incapable of solving these problems.

Without regulation, Enron and other fraudulent things would happen all the time and your economy would be even more of a Ponzi scheme than it is now. Without regulation, your environment would be so polluted as to be unlivable. It really would be survival of the least scrupulous and with the most money, and everyone else would be fucked.

Maybe in your capitalist fantasy land all of these would be self correcting problems. The problem is it would take decades, kill loads of people, and destroy most of your society along the way. And it likely still wouldn't do half of what people claim it would.

Pure laissez faire capitalism is as much of a unicorn as the socialist workers paradise is. The problem nobody seems to like to acknowledge is pure capitalism will fuck you just as deeply as pure socialism -- only in entirely different ways.

Neither system can actually exist in the extreme forms people like to advocate. Taken to their extremes, they're both full of shit.

Re:Not really news...

[clarkkent09]

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.

Hmmm ....

[gstoddart]

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.

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.

Why?

[noobermin]

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.

Re:Why?

[mythosaz]

Will McAvoy: [Looks at Jenny] And, yeah, you... sorority girl. Just in case you accidentally wander into a voting booth one day, there are some things you should know. One of them is: There is absolutely no evidence to support the statement that we're the greatest country in the world. We're 7th in literacy, 27th in math, 22nd in science, 49th in life expectancy, 178th in infant mortality, 3rd in median household income, number 4 in labor force and number 4 in exports. We lead the world in only three categories: number of incarcerated citizens per capita, number of adults who believe angels are real and defense spending - where we spend more than the next 26 countries combined, 25 of whom are allies. Now, none of this is the fault of a 20-year-old college student, but you, nonetheless, are without a doubt a member of the worst period generation period ever period, so when you ask what makes us the greatest country in the world, I don't know what the FUCK you're talking about!... Yosemite?
[Stunned silence]

Re:Why?

[girlintraining]

We're 7th in literacy, 27th in math, 22nd in science, 49th in life expectancy, 178th in infant mortality, 3rd in median household income, number 4 in labor force and number 4 in exports. We lead the world in only three categories: number of incarcerated citizens per capita, number of adults who believe angels are real and defense spending - where we spend more than the next 26 countries combined, 25 of whom are allies.

Literacy: 48th.
Math: 32nd.
Science: 14th
Life expectancy: 33rd
Infant mortality ('05-10): 40th.
Median household income: 4th.
Labor force: 3rd
Exports (per capita): 43rd
Exports (gross): 2nd
Incarceration (per capita): 1st
Adults (belief in angels): No reliable statistics available. 41-80%
Defense spending (gross): 1st
Defense spending (% GDP): 2nd (tied with Russia)

"where we spend more than the next 26 countries combined, 25 of whom are allies."

False. Only the next 14. Of those, only 9 are allies.