The price of Internet is too high

October 28, 2013

(Photo by ojbyrne.)

There's been a lot of debate about whether the United States is falling behind the rest of the world on broadband speeds. Upgrading to the latest networking technology is essential for a faster Internet in the long run. But a country's average speed is also affected by another factor: affordability. A high-speed plan will do nothing for you if its price is out of reach for ordinary consumers. And as new research shows, Americans are still paying through the nose for what residents in some cities overseas get at a substantially lower rate.

In American cities like New York, you can buy a 500 Mbps connection that's 58 times faster than the U.S. average. Here's the catch: It'll cost you $300 a month, according to the New America Foundation's Cost of Connectivity report. In Amsterdam, however, the same connection can be had for around $86.

The same discrepancies hold when you move down the speed ladder, said New America's Nick Russo.

"People may be opting for similar speeds [compared to foreigners] — and that may be what the average speed is — but they're often paying more for it in the United States," he said.

In Seoul, a triple-play package for phone, TV and Internet at speeds of 100 Mbps for both uploads and downloads will run you $35 a month. By contrast, Verizon will charge New Yorkers $70 a month for a triple-play package with Internet at 15 Mbps down and 5 Mbps up on its FiOS service. Verizon's Internet is both more expensive and slower at the same time.


(New America Foundation)

The rest of the report goes on to highlight other inequities, and at 14 pages, the whole thing is worth a read. But one additional point worth mentioning is that all of the top-performing American cities in the study are those that are disrupting the business for incumbent ISPs. Remember Verizon's $300 for 500 Mbps plan? In Bristol, Va., the city's publicly operated fiberoptic network gives you twice as much speed for just $19 more. Chattanooga, Tenn. offers an even more attractive deal: the same speeds as Bristol (1 Gbps, or 1000 Mbps), but for $70 a month. Meanwhile, Google Fiber has encouraged AT&T to step up its own fiberoptic rollout in Austin.

Part of the advantage these cities enjoy, Harold DePriest, CEO of Chattanooga’s public utility, EPB, said earlier this summer, is that once the technology is built, they no longer have to play by the same rules that commercial ISPs do. That's because the technology behind fiberoptic networks are much more scalable.

"We're pricing this and selling it like our competitors," said DePriest, "but they have constraints on bandwidth that we don't have. "Our strategic advantage is that we have unlimited bandwidth [using fiber]."

Critics of municipal fiber say taxpayers shouldn't have to pay for huge networks that Verizon and AT&T themselves have balked at building. Brent Skorup, a tech policy researcher at George Mason University's Mercatus Center, says other governmental incentives may also help make municipal fiber — and many of the foreign offerings — more affordable to the average consumer. If that's the case, then the question about U.S. Internet being so expensive becomes a tax policy issue rather than one about technology or competitiveness.

Still, how a city chooses to finance a fiber project differs from place to place. Chattanooga, for example, went with bonds rather than new taxes. Besides, since ISPs can justify higher prices when networks are more congested, Americans still wind up paying a premium for Internet — they just hand the money to the cable company, not to the city.

Making international comparisons can be dicey. But there's good evidence here that affordability, not absolute speeds, are worth our attention.

Brian Fung covers technology for The Washington Post, focusing on telecom, broadband and digital politics. Before joining the Post, he was the technology correspondent for National Journal and an associate editor at the Atlantic.
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