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."
Monopolies suit the surveillance state (Score:4, Interesting)
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 [newyorker.com], 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 [wikipedia.org], 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 [integer-research.com] 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.
Pay to use would solve everything (Score:4, Interesting)
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.
Deregulated monopoly (Score:5, Interesting)
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.
Re:Hmmm .... (Score:4, Interesting)
Day 1: Deregulation is evil!!!
Day 2: Deregulation is wonderful!!
In this story, all deregulation is evil and capitalism is an illusion. In the Tesla story, deregulating car dealerships [slashdot.org] is great and everyone loves it. In states where people can choose their own power provider, deregulation is great. When we deregulated phone sales, everyone was happy. (For those who don't know: In the 1970s you had to buy phones from the phone company. they were all big, ugly, and expensive. No answering machines were allowed, etc.)
Can we just stop the blanket "all deregulation sucks" posts? Removing bad regulations is good. Updating old regulations to reflect modern technology is good. But not all regulations are bad. It just isn't black and white.
P.S. What deregulation of high-speed internet access were you even talking about? How can you say it was good or bad without even knowing what is being discussed?
Re:Probably Obama. Or the Tea Party. (Score:5, Interesting)
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. (Score:5, Interesting)
And as of typing this, three ignorant fools modded you insightful.
Do you know what happens in reality, behind those pretty words and talking points that are carefully fed to you via mass media? When your megatelco sees competition it:
1. Blocks peering at local exchanges which it mostly controls, or puts in prices so high that fledgling business goes under.
2. Lowers its user prices for a short period, dumping the price and bankrupting the competitor. Then pushing prices to even higher level to gain the money lost back.
3. Buys new competitor out outright.
4. Uses local bought and paid for legislature to block the competitor.
5. Reminds its contacts in the local media to talk about 4. as if it's the fault of the government, and that more deregulation is needed to control 1-4. And so useful idiot like yourself types up that wonderful ideological drivel that is being carefully fed to him and he gets to parrot, and three other ignorant fools mod him insightful.
Natural monopoly is a myth (Score:4, Interesting)
Re:Telco oligopoly (Score:3, Interesting)
This is a horse shit excuse and I'm tired of hearing it.
"A variety of market and technical factors, government efforts, and access to resources at the local level have influenced the deployment of broadband infrastructure. Areas with low population density and rugged terrain, as well as areas removed from cities, are generally more costly to serve than are densely populated areas and areas with flat terrain. As such, deployment tends to be less developed in more rural parts of the country. Technical factors can also affect deployment. GAO also found that a variety of federal and state efforts, and access to resources at the local level, have influenced the deployment of broadband infrastructure."
Source: GAO-06-426, A Report to Congressional Committees. May, 2006. US General Accounting Office.
Attempts have been made; in 2007 the Community Broadband Act was proposed. It died in committee. It would have federalized broadband deployment and removed municipalities' and states' ability to restrict or impede broadband deployment. Did you know that in several states, broadband is banned by law?
No. You probably didn't, because as you put it... it's a "horse shit excuse". I must admit, I'm incredulous too that a government as big as ours could be incompetent, or that the Constitutional separation of federal and state might occasionally create entry barriers for prospective companies looking to lay down infrastructure. Yes. Totally shit. Forget I mentioned that; and be doubly sure to forget that large "megalopolis" like New York continually try to pull stupid legislative shit like banning fountain sodas over a certain size, or those stickers on everything claiming the product only causes cancer if you live in California.
Re:Telco oligopoly (Score:5, Interesting)
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:Why? (Score:4, Interesting)
Why is Broadband more expensive?
Regulatory hurdles, low population density, and we are one of the largest countries by area on Earth.
Why do we pay more for healthcare?
Because America subscribes to a warped version of capitalism that places things in the private domain when most other governments wisely decided to manage these things. This includes, but is not limited to, basic utilities like water, electricity, telecommunications, internet, and even roadways. This policy benefits a tiny fraction of Americans -- perhaps 1 in every 250 Americans, while harming the rest, and it is not changed because our government has essentially been co-opted by wealthy private interests and corporations. As our popular media is controlled by the same, the illusion is presented of choice regarding political affiliation and candidates, when in fact no choice exists.
Why is our productivity so high compared to real wages?
Because we don't take vacation, or sick days, and have no labour party present to defend workers' rights, leading to the majority of states passing variations of Right to Work laws which effectively ban unions and allow employers to fire people for any reason, at any time. As a result, the rights of workers suffer, leading to institutionalized abuse and exploitation of workers. Should labor prices rise, it is easy to simply order Congress to flood the affected market with immigrants and crash the labor price.
Why does our government spy on us and disregard our civil liberties?
All governments do that. Ours just got caught. As far as why they do it, the reasons are too numerous to list here, but effectively it comes down to national security and preventing any widespread political insurrection amongst a highly exploited worker caste.
Why are we below the average in ability according to OECD?
Because we invest very little in public education, and the price of post-secondary education is inflating at double digit percentages every year, effectively eliminating access to higher education for many, if not the majority, of the population.
Why is the gap between the richest and the poorest on par with that of African countries?
This isn't entirely accurate. Japan has the lowest wealth inequity of any country on Earth, and the highest is Bolivia. The United States, while scoring nearly the same as Uguanda, also wasn't that far off from the United Kingdom. Source [wikipedia.org] The problem is not a wealth "gap" per-se but rather that when you plot wealth distribution as a curve, the United States has an uncharacteristically high concentration of wealth amongst the top 1% -- far higher than any other country on Earth.
There are many reasons for this, but essentially it comes down to a lack of inheritance tax and how our economy has been structured; We are much more an investment and service-based economy than most, and both of these, but investment in particular, leads to rapid wealth disparity being created. Deregulation of the stock market, banks, etc., also have contributed significantly to this problem -- we are, as it were, robbing Peter to pay Paul. See also: Too big to fail. While the impact of any one of these legislative initiatives isn't enough to change things, collectively they are excerting a continuous pressure on the economy and over the past thirty years the problem has worsened. However, the retirement of the boomers has acted like a catalyst, rapidly accelerating this trend.
And finally, why the fuck do people keep telling me this is the greatest country on Earth?
Because we live here. Duh. Nobody's national anthem starts with "We're Number Two!"
Re:No It's not. (Score:2, Interesting)
What the ...
I'm an Australian that moved to the US and I pay more money for less speed here in the US. I moved from a city of 400,000 in Australia to another similarly-sized city in the US so I think the comparison is apt. While the Australian price on your map looks vaguely accurate to me, where did they pull this "$20" for the US from? The only plan you can get here for that kind of money is the lowest-tier DSL (768 kbps or maybe 1.5 Mbps).
I'm not sure that map is comparing apples to apples. Sure you might be able to get a slow DSL plan for $20 here. But I was getting 60 Mbps for around $50 in Australia! Here, the fastest I can get is 30 Mbps, for $60 a month. Fractionally more expensive...but half the speed.
So yeah, I'm disputing the 'Australia is a hell of a lot more expensive' thing. That was true 5-10 years ago. Not these days. Australia also has a lot more competition (almost everyone has ~dozens~ of ISPs to choose from, whereas here it's basically two choices - the local DSL monopoly and the local cable monopoly ... FiOS only if you're very lucky).
Re:Telco oligopoly (Score:5, Interesting)
Re:You don't know what you are talking about. (Score:4, Interesting)
I've done plenty of work in neighborhoods. The work is easier, because there is less traffic. No, you don't have to rip everything up, initially you'd take a big saw, saw out the pavement, run a trencher down it, put in the cable with boxes for each house, bury it and pave it over. It'd take maybe a day per block with at most dozen people, so maybe $5,000 for a block of a two dozen houses (both sides of the street). That's just $200 per house initially. Then you'd connect people when they sign up, because people aren't gong to let you bury a cable in their yard for a service they aren't getting. That would probably be a half days work for a team of 4, so about $800. So if you were doing a neighborhood of 1000 houses, you'd need $200,000 initially which you'd probably issue bonds for, you could easily get those at 10% annual interest because it's for physical infrastructure. If 125 houses signed up you'd need another $100,000 to wire them up and you'd probably take out bank loans to cover that cost, which you could get for much less than 5%. Your annual costs for the interest would be less than $20,000 for initial capital, and less than $5,000 for the connections. The total cost on interest would be just $17 per month per connected house in this scenario. Assuming you were installing premium fiber, you could charge $50-$100 per month, so the cost of installing the fiber would be relatively minimal.