Is the US Leading or Lagging in Broadband?

Recently there has been a lot of discussion on whether the United States is behind Europe in terms of high-speed Internet deployment and service adoption.  The story was once that the US was lagging behind and that network regulations, like the ones being put into place in Europe, were the answer. 

With the passage of time, however, many have now concluded that the US has caught up and surpassed Europe – both in terms of wired broadband services and 4G wireless capabilities. 

The culprit for the turnaround, according to the words of European policymakers and executives, is that those European regulations ultimately stunted network investment and caused Europe to fall in its rankings.  The regulations, among other things, required broadband investors to share facilities with competitors at artificially low prices, which ultimately discouraged investment by all. 

Indeed, once thought to be the magic cure for boosting broadband investment, Europe’s regulations would ultimately be the cause for its slump. 

While a recent Huffington Post article notes the discussion of this drop in investment, it asks so-called experts, who dispute this progress. 

Here is the problem – some of these experts have a core belief that the Internet should be treated as a public utility or a government-owned service.  That is a philosophy not supported by the facts, and it is one that facts cannot persuade.  

At a time when prices of everyday goods and services are rising and disposable incomes are tight, Americans are able to access a greater array of content and services at ever-faster speeds. In fact, the price per megabit of data has fallen dramatically over the last decade and, according to a recent Information Technology and Innovation Foundation report, entry-level broadband pricing in the U.S. is second in the OECD. 

Furthermore, using the latest Bureau of Labor Statistics data, the Consumer Price Index for Internet services has fallen by half since 1998, in inflation-adjusted terms.  What the statistics do not show, however, is that speeds have increased exponentially since that time, which means that quality-adjusted prices have fallen exponentially too.   

In stark contrast to the picture painted by some, the reality is that U.S. consumers are benefiting from the current state of broadband far more than their counterparts overseas.

Critics often try to compare the U.S. to individual countries in the E.U. as it relates to broadband prices, availability and speed. This is the wrong analytical approach for many reasons. In some cases, critics overlook population density or simply ignore geographic realities that hinder broadband penetration.

It is a well-known fact that broadband deployment costs increase as population density declines.  So, it should not be surprising that with Europe being more than twice as dense, it should have lower deployment costs, higher take-up rates and faster speeds. 

Yet, despite Europe’s higher density, its speeds are not faster.  As a White House report notes, “The average connection speed in the United States in the fourth quarter of 2012 was 7.4 Mbps, the eighth fastest among all nations, and the fastest when compared to other countries with either a similar population or land mass.” 

In terms of fiber-to-the-home (FTTH) deployment, an IDATE presented the FTTH Council European Conference concluded that Europe is far behind the U.S. in terms of mobile broadband.

The White House report called the North American wireless market “the fastest in the world, nearly twice that available in Western Europe, and over five times the global average.”  Moreover, the report concludes: “not only was the United States the first country to deploy 4G LTE networks at scale, but also, as of mid-2012 nearly half of the world’s LTE subscribers were within the United States.” 

That’s a pretty strong statement, and the gap appears to be increasing.

Some critics may suggest that U.S. wireless prices are slightly higher than in Europe.  However, the average U.S. consumer has four times the usage, which puts the U.S. as having the lowest price per minute compared to its European counterparts and less than one-third of most countries, according to the FCC’s own data.

In addition, because government subsidies are poured into Internet deployment in these countries, as Aalborg University’s Roslyn Layton points out in AEI’s The American, end-user prices only appear cheaper because taxpayers pickup part of the tab.

If critics had their way, U.S. regulators would step in and create European-style regulations on Internet Service Providers that would be filled with price controls on privately owned networks. Such a plan would inevitably discourage investment and lead to slower services for consumers. 

That unfortunate consequence of regulation is happening in Europe right now, and a similar European-style regulatory model would leave American consumers in the same position – with anemic infrastructure investment.  

On this side of ocean, Americans have spoken. The consumption of data, expanding innovation, and new online features and services all support the idea that America’s broadband marketplace is working.

Policymakers must continue to foster an environment that empowers investment to make broadband available to an ever-wider number of consumers at even faster speeds.

The fact is that the US, because of its geographic density, should not be expected to have the number one worldwide ranking for deployment and use of high-speed communications.  Yet, despite that hurdle, the United States has managed to position itself as a global leader in broadband. 

There is one bright spot here.  This example can serve as a lesson for policymakers and regulator on how onerous regulations have adverse consequences on consumers. 

Steve Pociask is president of the American Consumer Institute Center for Citizen Research, a nonprofit educational and research organization.  For more information, visit www.theamericanconsumer.org.

 

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