Plug N'Pay:
U.S. consumers suffer from a dearth of choices among broadband providers.
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At the turn of the millennium, the U.S. had some of the best broadband access in the world. It reached more homes, and at a lower price, than most every other industrial country. Ten years later the U.S. is a solid C-minus student, ranking slightly below average on nearly every metric.
Just how the U.S. lost its edge and how it plans to get it back are the issues before the Federal Communications Commission as it prepares to launch the most significant overhaul of network policy since the birth of the Web. As part of last year’s stimulus package, Congress provided $7.2 billion to expand broadband access to every American. It also required the FCC to outline a plan for how to make that happen. The outcome of the FCC’s deliberations, due February 17, could determine not just control over the broadband infrastructure but also the nature of the Internet itself.*
Today about 51 percent of U.S. households have broadband access, and those that do pay roughly $45 per month. Contrast that with South Korea, where 94 percent of households browse the Web at $37 per month (and at download speeds on average eight times quicker). According to an October report to the FCC from the Berkman Center for Internet & Society at Harvard University, the decline in the adoption, pricing and speed of broadband in the U.S. can be traced back to a series of key decisions made by the FCC nearly a decade ago.
These decisions limited most Americans to one or two choices of Internet service provider (ISP)—either the cable company or the telephone company. This is not the case in the rest of the industrial world. There so-called open-access policies mandate that the company that owns the physical infrastructure must sell access to those lines on a wholesale market. For example, France Telecom owns the telephone lines, yet consumers can choose from a number of different Internet service providers, each of which leases access from France Telecom’s infrastructure.
In the U.S., that competition doesn’t exist. The reason is that in early 2002, then FCC commissioner Michael Powell reclassified broadband Internet services as “information services” rather than “telecommunications services.” The ruling allowed DSL (digital subscriber line) and cable operators to avoid falling under the open-access rules mandated by the 1996 Telecommunications Act. At the time, Powell justified the decision by saying that it was the best way to fast-track greater broadband deployment.
The evidence to date has not supported this strategy. “When we look at the countries that have the highest speeds and the lowest prices,” says Yochai Benkler, a professor at Harvard Law School and lead author of the Berkman report, “there is a clutch of competitors who entered over the past seven or eight years using open access to build their own competing advantages—agile, innovative competitors that catalyze the market.” By reclassifying broadband services yet again, the FCC could bring those advantages to the U.S.
The upcoming FCC report is also expected to address the controversial matter of “Net neutrality.” “Why has the Internet proved to be such a powerful engine for creativity, innovation and economic growth?” asked Julius Genachowski, chair of the FCC, in a recent speech. “A big part of the answer traces back to one key decision by the Internet’s original architects: to make the Internet an open system.” The structure of the Internet allows any user to access any site—and any entrepreneur to reach any user. It’s now a cliché, but Web giants like Facebook and Google were started by students in bedrooms. They never could have flourished without access to an open-distribution system.
That openness has recently come under threat from some Internet service providers. Citing the strain on their infrastructure from peer-to-peer file sharing, ISPs have expressed an interest in blocking or degrading some content as it passes through their lines. Yet this ability would open a Pandora’s box. What if Comcast, the anticipated new owner of the media company NBC Universal, decides to throttle back video from its competitor CBS? Or what if it requires all video purveyors—even shoestring start-ups—to pay a monthly transmission fee, lest their videos suffer delays in transit? Genachowski’s comments suggest that the FCC will formalize the information agnosticism that has been built into the Web from its birth.
The final report is expected to touch on a huge swath of other issues, from wireless spectrum allocation to television set-top boxes. Some recommendations will have to go through Congress, whereas others could be enforced by the FCC on its own. Whatever the outcome, the broadband landscape should look very different in a year, in way that the next generation of Internet entrepreneurs hope will be level and fair.
*Editor's note (2/3/10): After this story was published, the FCC said it would miss its February 17 deadline and requested a one-month extension.
Note: This story was originally printed with the title "Bigger, Better Broadband"
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17 Comments
Add CommentThe article states:
Reply | Report Abuse | Link to this“Today about 51 percent of U.S. households have broadband access, and those that do pay roughly $45 per month. Contrast that with South Korea, where 94 percent of households browse the Web at $37 per month (and at download speeds on average eight times quicker).”
While not objecting to improving network access, in fairness it should be noted that, presuming that many more South Korean households are located in fewer cities than in the U.S., the cost and difficulty of providing high speed network access is much lower for South Korea. Certainly South Korea is geographically much smaller than the U.S. Such comparisons are ludicrous, but unfortunately effective. If I lived in South Korea, I'd object to excessive internet access charges.
Digital freedom, please.
Reply | Report Abuse | Link to this*stares hard at Apple*
It is, of course, true that everything is more difficult in a large country like the USA, but it is also true that those damn socialist, not to say communist, not to say (fill in yourself) ... countries in much of the rest of the industrialized world have a tradition of working for the people. It is most irritating for us in the US, as we want everyone (inside and outside of our country) to have the same opportunity and choice by their own work, especially the poor (a vast minority) and disenfranchised. Less government and less taxes do that. Some of the Scandinavian countries, with their huge taxes, have only been lucky in having some of the highest living standard in the world for soooooo long (much too long if you ask me).
Reply | Report Abuse | Link to thisUS is getting behind in so many areas only because other countries are socialist. We can at least revel in being anything but, even as our poverty rate increases. Some of our people will have to pay something for their freedom.
By the time we pay for cable and internet (slowest speed). There's not much money left for other things. A sports and game person has to have to cable. Me it's not a big deal, I was happy before we had it, I'd be happy without it. With a lot more extra time.
Reply | Report Abuse | Link to thisWell, that's odd. A Republican's plan to "fix" an industry almost results in its destruction. How odd. These guys are usually really on the ball when it comes to knowing anything about business or economics.
Reply | Report Abuse | Link to thisNetiquette is sufficient to keep the net neutral, we don't redundantly need an enforcement of that.
Reply | Report Abuse | Link to thisYeah, unfortunately, that's not how the world works. This belief in "the market will police itself" is a fantasy pushed by the same people who want you to deregulate industries so they can screw everyone.
Reply | Report Abuse | Link to thisA key thing left out of this article is that fact that US has a very low population density, especially compared to S Korea (it's like 20x higher than in the US). Built into some of our higher cost is that the 'last mile' is much farther away, therefore more expensive to build out for the provider. Those rural folks don't bear that cost - everyone does. Lots of rural areas don't even have it yet - in part, at least explaining the lower adoption numbers than many other (smaller) countries.
Reply | Report Abuse | Link to thisGreat! Now if the FCC would only hold the news media's 'feet to the fire' about being a legitimate public service, and distinguish between objective news reports and commercially motivated entertainment.
Reply | Report Abuse | Link to thisQuestion: if its as easy to wire the whole country for broadband as some of you guys seem to think, why isn't everybody out there doing it?
Reply | Report Abuse | Link to thisInternet freedom for American's requires a fast, cheap and efficient broadband network not today's one of the most expensive and least efficient in the OECD.
Reply | Report Abuse | Link to thisThe cheapest route is a fiber to the block network in every American city, town and village with wireless N 2/5 Ghz Access points at each block node. From that block node signal can be distributed via 1 GigE copper to most subscribers and fiber to the rare more distant ones. The small incremental cost of the high speed network over the low speed smart meter net power companies are planning, pays for the whole network for a extra few dollars a month per subscriber.
Television and telephone are now available via the internet.
Portable users can connect at 100+ Mbps with WiFi.
With few economies of scale, small and large networks are cheap.
Time Warner makes 3000% profits with their ancient antiquated cable equipment. They could cut their fees to 3% of current level and still make money - lots of room for a nonprofit to provide a service at for a few bucks a month.
http://www.wired.com/epicenter/2009/04/time-warner-cab/
Obama needs to reregulate these Pirates or start a utility like the TVA but in broadband.
Politicians love those Big Telecom campaign donations but for once could they put your oath to serve the voter ahead of big money.
sethdayal- In reality, there is no free lunch. No matter how much bandwidth is installed, it will be consumed. Note the annoying “Fight-Science” videomercial currently consuming bandwidth on this very page. Believe me, I certainly wish it would stop, yet a metered system would charge those costs to me, and to you. While it has been pointed out that rural internet users are not paring their own way on the network, keep in mind that it is the affluent neighborhoods with high demand generated by gaming and hi-res video traffic that currently receive the greatest bandwidth allocations.
Reply | Report Abuse | Link to thisI suggest that websites pay all metered internet access costs – they and their advertisers are responsible for generating the demand, and profiting from it!
You have some application in mind that uses up 1 GigE into your house?
Reply | Report Abuse | Link to thisIncremental bandwidth is a tiny part of the cost of supporting broadband so only a tiny usage charge is justifiable. Big Telecom is already making a 3000% profit on broadband, lets get it down to the 12% return on equity other private utilities enjoy first, before we give them more revenue.
sethdayal...video on demand...remote backup...video phones...etc...I would love to have 100MB into my house.
Reply | Report Abuse | Link to thisOnce urban areas have "true" high speed internet...then the rural areas should be covered with some type of wi-max.(or at the same time;-)
I'm lucky to have both cable and fiber running down my street...unfortunately the cost for what I consider high bandwidth is very expensive and so I make do with the lowest plan they have.
sethdayal – If you build it, they will come. Frankly, I don’t know what the effective data rate of N 2/5 Ghz or 1 GigE pipes would be, but it’s probably immaterial. If sufficient bandwidth were available video display manufactures will be want to increase resolution to churn additional revenues within a few years, if nothing else.
Reply | Report Abuse | Link to thisI presume your suggestion allows for n% concurrent transfers at each node point, unless you plan to block or buffer them. I’m not a network expert, but I don’t quite follow your logic about higher speed end points not increasing network costs when the network backbone must provide sufficient bandwidth to support total system throughput requirements, otherwise blocking occurs and effective end point speed diminishes dramatically. I also suspect availability of radio frequencies to be an issue in which each city block, if I follow you, is wirelessly connected to a city node (?).
As it works now, the service/media providers pay very little for the traffic the load onto the network, and have little economic incentive to reduce requirements. That’s why I suggest that web servers bear the incremental cost of additional network load in any usage charge. The complexity of metering and billing would also be simplified. I think that’s just fundamentally sound economics.
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