Why Is Broadband More Expensive In the US Than Elsewhere? 569
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."
Re:Telco oligopoly (Score:5, Informative)
Gizmodo article [gizmodo.com] on it from earlier this year.
Re:Probably Obama. Or the Tea Party. (Score:4, Informative)
Well, it's complicated.
Take the example of France. Broadband internet and digital TV go largely through DSL. And yes, it's pretty damn cheap. When I was there, three years ago, I was paying 30 Euros / month for broadband internet + unlimited phone calls + television with a bazillion channels (did you know that there are two channels broadcasting in frigging Aramaic?)
Now one reason why France has cheap, abundant DSL is because of massive infrastructure built by former government monopolies. But at the beginning, even though they had this infrastructure, internet was still pretty damn expensive. The few telcos that were operating the networks obviously had a very gentle concept of competition.
Then this guy [wikipedia.org] came along, leased an existing network and offered much better service at much lower cost. Everybody had to align.
So it's not just about competition or government - it's both together. Also, there's competition and "competition". Competition only works if you have some outsider willing to move in and break the "gentlemen's agreements". Apparently T-mobile is kind of doing this in America with mobile phone contracts, but broadband internet is still firmly within the grip of the cable oligopoly.
Re:Probably Obama. Or the Tea Party. (Score:2, Informative)
Except that monopolies are almost always created by regulation.
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.
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?
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.
Again, why are there no other choices of Cable providers? Typically, there is local regulation that makes it is a legal nightmare as well as a huge initial cost for a second company to come in. Everybody has access to poles, a company "only" has to run its own wires and presto, you have a second provider. The only problem with this is that running lines carries an enormous up front cost, which made sense to the first one to come in due to the deal with the local government (regulation again, which typically included monopoly access for a number of years as part of the deal) but it doesn't make financial sense for a new company.
The problem is how to incentivize companies to come into markets "owned" by an existing provider: 1) simplify legal process of getting necessary permits 2) Offer incentives like those offered to the initial company - something you should take up with your local government. 3) If the current provider is really "gouging" the customers, it should be no problem for the newcomer to offer a better deal and still be profitable
Re:No It's not. (Score:5, Informative)
I should have included this article which puts things in better perspective.
http://royal.pingdom.com/2013/03/12/broadband-prices/ [pingdom.com]
Re:Probably Obama. Or the Tea Party. (Score:5, Informative)
"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. (Score:5, Informative)
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.
Re:Telco oligopoly (Score:3, Informative)
Why doesn't the Northeast megalopolis have cheap internet? It has a population density of 360 people/sq km
Well there's your answer. Seoul has a population density of 17,288 people per sq km.
Re:Telco oligopoly (Score:5, Informative)
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. [wikipedia.org]
Your argument needs more argument, I think.
Re:Telco oligopoly (Score:4, Informative)
"Why don't the east and west coasts have high speed rail,"
Old established rail that can't be taken out of service, and NIMBY.
The Northeast in particular would benefit from HSR, and note that rail made the 'burbs practical LONG before automobiles were available, but there isn't room for a buildout.
Re:Why? (Score:5, Informative)
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 [wikipedia.org]: 48th.
Math [slj.com]: 32nd.
Science [nationmaster.com]: 14th
Life expectancy [wikipedia.org]: 33rd
Infant mortality ('05-10) [wikipedia.org]: 40th.
Median household income [wikipedia.org]: 4th.
Labor force [wikipedia.org]: 3rd
Exports (per capita) [wikipedia.org]: 43rd
Exports (gross) [wikipedia.org]: 2nd
Incarceration (per capita) [wikipedia.org]: 1st
Adults (belief in angels) [about]: No reliable statistics available. 41-80%
Defense spending (gross) [wikipedia.org]: 1st
Defense spending (% GDP) [wikipedia.org]: 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.
Nash Equilibrium (Score:5, Informative)
http://en.wikipedia.org/wiki/Nash_equilibrium
there is no reason an ogilopoly has to achieve the maximization of global utility
bad diagnosis and treatment plan. (Score:2, Informative)
Actually it has more to do with government interference in the market and the way spectrum was licensed and then sold at high costs by the FCC. As a result at one time there were like 300 little fiefdoms of bandwidth in cellular traffic. Which is one reason we tend to lag on cellular and one of the reasons WiMax and friend don't catch on for wireless broadband throughout a citywide area. Too many companies have paid to much for spectrum that they nickle and dime us to recoup. On the cable stuff the monopolies granted in an area are very anti-competitive. So a Comcast can charge like 97% profit rates for home internet.
The answer to the existing problems is most certainly not more regulation. It is getting government as out of the business and dropping some of the monopolies.