At the same time, the Internet and investments in broadband infrastructure have brought huge economic benefits--possibly accounting for a third of our productivity growth over the past decade. The economic importance of broadband and the relatively poor standing of the U.S. in broadband penetration have led to calls for government subsidies, investment, and regulations on how broadband providers can use and charge for their infrastructure. Policymakers and others hope that telecom legislation working its way through Congress will improve U.S. international broadband competitiveness.
Despite the hype, it's not clear that there's really a problem, and it is important to ensure that new legislation does not create one.
Critics contend that the broadband market is a "cozy duopoly" of DSL and cable providers that leaves consumers poorly served. But the facts suggest otherwise. The vast majority of broadband connections are indeed DSL or cable, but they compete vigorously with one another and with new technologies like wireless broadband, whose share is growing steadily.
Companies are investing bundles in broadband, and consumers are signing up for it at record rates. According to the Federal Communications Commission, the number of high-speed lines in the U.S. increased by nearly one-third to almost 43 million between June 2004 and June 2005. And a survey by the Pew Internet and American Life Project found that the number of Americans with broadband access at home increased by 40 percent between March 2005 and March 2006. Meanwhile, prices for broadband access are coming down while available speeds are going up.
The Pew survey found that the average price of residential DSL service decreased from $38 per month in February 2004 to $32 per month by December 2005. Some evidence suggests prices may have fallen further still, with Verizon Communications, AT&T, Comcast, and others offering service plans at less than $20 per month. And as prices fall, providers are upgrading connections and investing in new infrastructure to provide higher speeds to consumers.
The rapid growth, price declines, and increasing speed and service options suggest that this market isn't really so cozy. New technologies should ensure a competitive marketplace for years to come. While the U.S. does lag 11 other countries in broadband penetration, international comparisons must be considered carefully. The share of the Americans who are Internet users, for example, compares much more favorably with the rest of the world and is higher than those of other countries often held up as models to be emulated, such as Japan.
What explains this difference between broadband penetration and Internet users? For one, about half of U.S. Internet users still connect via dial-up. Unlimited/flat-rate local telephone calls, innovations like "Web accelerators," and competition that has pushed subscription prices below $10 per month have allowed dial-up to remain an attractive option for many people. While the number of people with dial-up connections will surely continue to fall, the Pew survey reports that nearly 60 percent of dial-up users claim to have no interest in broadband.
What about broadband speeds? In some countries, notably Japan and Korea, providers advertise Internet speeds that are many times faster than those available here. Advertised speeds, however, may not accurately represent actual speeds. For example, providers in Hong Kong advertise some of the highest connection speeds in the world, but the island's telephone authority recently censured the Hong Kong Broadband Network for misleading claims regarding the speed of its service.
Numerous factors affect the speeds actually available to customers, including line lengths, the number of users sharing the bandwidth connection and the location of the content accessed. Simplistic international comparisons do not account for such considerations.
Nevertheless, universal broadband could bring real benefits, so it is worth asking what the government could do to encourage it. We offer three suggestions.
First, make more spectrum available and allow it to be tradable to ensure that it goes to its highest-valued use. Some of that use would likely be for broadband.
Second, eliminate costly franchising regulations that require providers to negotiate with local governments in order to offer video services over broadband lines. These franchising rules represent anticompetitive and anticonsumer barriers to entry. The House recently passed legislation to eliminate such requirements; the Senate should do the same.
Third, do not mandate "Net neutrality," which would restrict how broadband providers can charge to use their infrastructure. In a market as dynamic as broadband and the Internet, the price regulations that Net neutrality would entail are likely to be counterproductive.
So take a deep breath, relax and keep browsing. Scant evidence supports the idea of a U.S. broadband problem. At the same time, let's recognize the importance of broadband--and in terms of policy, as Hippocrates said, "First do no harm."
Biography
Seth Sacher is a partner at the economics consulting firm of Bates White. Scott Wallsten is a senior fellow at the AEI-Brookings Joint Center for Regulatory Studies and a resident scholar at the American Enterprise Institute.
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http://en.wikipedia.org/wiki/American_Enterprise_Institute
These fellows offer very slanted view of the state of broadband in the US today. The fact is, we ARE in 11th place, and that is not a good thing, anyway you look at it.
We will continue to loose our internet dominance if allow policy to be written for the highest bidder instead of the good of the population.
I could write a whole article rebuking these points but I won't, the facts are out there. Believe what you want.
http://en.wikipedia.org/wiki/American_Enterprise_Institute
These fellows offer very slanted view of the state of broadband in the US today. The fact is, we ARE in 11th place, and that is not a good thing, anyway you look at it.
We will continue to loose our internet dominance if allow policy to be written for the highest bidder instead of the good of the population.
I could write a whole article rebuking these points but I won't, the facts are out there. Believe what you want.
I'm sorry but your claims that innacurate advertised speeds in Asian countries actually put them on par with US service is downright ludacris.
I'm sorry but your claims that innacurate advertised speeds in Asian countries actually put them on par with US service is downright ludacris.
appalling. The fact is ISP (Telco and Cable) broadband services
(underlying infrastructure/tech) has stagnated for years in the
US. If, as this article contends, providers have been "investing
bundles" in broadband, it isn't apparent in any way shape or
form to the end user as of today.
Sure broadband signups have increased over the years, but
that's due primarily to the cost of already existing, long-
standing broadband services finally arriving at the same cost of
basic dial-up, which had been the cheaper and dominant
method of internet access in the US up until very recently. So
dialup customers could finally afford broadband (DSL) without
having to pay at least double or more per month for the
privilege. And the DSL providers could dangle increased new DSL
subscriptions to their stockholders to bolster the vitality of their
companies and depreciate the less profitable dialup connections.
However, this success story doesn't hold true for the cable
providers, who insist customers will always pay a premium for
the incrementally higher bandwidth of cable connections (but
still grossly sup-par compared with other countries) over DSL.
That's essentially the present state of the art for broadband
access in the US and it's as laughable as it is pathetic.
And it just pales in comparison to foreign markets. Here the
authors are left with only one excuse to offer: ISPs in markets
such as Korea and Japan allegedly inflate advertised bandwidth
that are never realized in the real internet world. Guess what
boys, the same holds true here in the US. US DSL and cable
connections never achieve their advertised speeds either, for the
very reasons cited in the article. In that regard, the playing field
is level throughout the world, including, of course, the US.
However, even inflated claims, to the extent that they actually
exist, are ultimately relative. If a 50mbps overseas ISP provider
actually realizes, say 40 mbps, that's still heads over heels better
than anything we'll ever see here in the US from the Telcos and
Cable - now, or for that matter, in the foreseeable future.
Finally, net neutrality doesn't in any way "restrict how broadband
providers can charge to use their infrastructure" an absolute
load of BS. What net neutrality strived to achieve was to prevent
ISPs (again Telco and Cable) from introducing NEW charges to
"use their infrastructure." Both Telcos and Cable have long had
their sights on being the kings of media (film, tv, etc.) providers.
With media content rapidly shifting to the internet, the prospect
of the internet becoming the tech of choice for delivering media
caught the Telco and Cable companies with their pants down.
Now, theoretically, ANYONE based on the internet could be the
new media king, leaving Telcos and Cable out in the cold, as the
transaction between the media provider and the customer
wouldn't involve the ISP - it manages just fine on the existing
infrastructure.
Thus, the Telcos and Cable companies have envisioned their
media plans going up in smoke and suddenly played the so-
called "preferred packet" card. In other words, if you choose to
get your media from the internet and it's from someone other
than the offerings directly provided by the Telcos or Cable
companies, they still want a piece of your transactional action -
regardless of where you get it from. It isn't a "charge for using
their infrastructure," it's a tax for using someone other than the
Telcos or Cable companies media offerings. Think of it as
superhighway robbery.
Oh yes, the state of broadband it just terrific here in the US...
appalling. The fact is ISP (Telco and Cable) broadband services
(underlying infrastructure/tech) has stagnated for years in the
US. If, as this article contends, providers have been "investing
bundles" in broadband, it isn't apparent in any way shape or
form to the end user as of today.
Sure broadband signups have increased over the years, but
that's due primarily to the cost of already existing, long-
standing broadband services finally arriving at the same cost of
basic dial-up, which had been the cheaper and dominant
method of internet access in the US up until very recently. So
dialup customers could finally afford broadband (DSL) without
having to pay at least double or more per month for the
privilege. And the DSL providers could dangle increased new DSL
subscriptions to their stockholders to bolster the vitality of their
companies and depreciate the less profitable dialup connections.
However, this success story doesn't hold true for the cable
providers, who insist customers will always pay a premium for
the incrementally higher bandwidth of cable connections (but
still grossly sup-par compared with other countries) over DSL.
That's essentially the present state of the art for broadband
access in the US and it's as laughable as it is pathetic.
And it just pales in comparison to foreign markets. Here the
authors are left with only one excuse to offer: ISPs in markets
such as Korea and Japan allegedly inflate advertised bandwidth
that are never realized in the real internet world. Guess what
boys, the same holds true here in the US. US DSL and cable
connections never achieve their advertised speeds either, for the
very reasons cited in the article. In that regard, the playing field
is level throughout the world, including, of course, the US.
However, even inflated claims, to the extent that they actually
exist, are ultimately relative. If a 50mbps overseas ISP provider
actually realizes, say 40 mbps, that's still heads over heels better
than anything we'll ever see here in the US from the Telcos and
Cable - now, or for that matter, in the foreseeable future.
Finally, net neutrality doesn't in any way "restrict how broadband
providers can charge to use their infrastructure" an absolute
load of BS. What net neutrality strived to achieve was to prevent
ISPs (again Telco and Cable) from introducing NEW charges to
"use their infrastructure." Both Telcos and Cable have long had
their sights on being the kings of media (film, tv, etc.) providers.
With media content rapidly shifting to the internet, the prospect
of the internet becoming the tech of choice for delivering media
caught the Telco and Cable companies with their pants down.
Now, theoretically, ANYONE based on the internet could be the
new media king, leaving Telcos and Cable out in the cold, as the
transaction between the media provider and the customer
wouldn't involve the ISP - it manages just fine on the existing
infrastructure.
Thus, the Telcos and Cable companies have envisioned their
media plans going up in smoke and suddenly played the so-
called "preferred packet" card. In other words, if you choose to
get your media from the internet and it's from someone other
than the offerings directly provided by the Telcos or Cable
companies, they still want a piece of your transactional action -
regardless of where you get it from. It isn't a "charge for using
their infrastructure," it's a tax for using someone other than the
Telcos or Cable companies media offerings. Think of it as
superhighway robbery.
Oh yes, the state of broadband it just terrific here in the US...
Having lived the last year in Germany, it is very easy to seem the problems in the US internet market due to the duopoly situation we have here. In Germany the options include a cable modem or DSL access from at least 5-6 providers. The result is the service is cheaper, quality is better and speeds are faster than what you can get in the US. The market here is in desperate need of competition. Instead of helping the telephone and cable companies, we need to do something to force them to compete.
I am amazed to read an article with this strange perspective on CNet.
Having lived the last year in Germany, it is very easy to seem the problems in the US internet market due to the duopoly situation we have here. In Germany the options include a cable modem or DSL access from at least 5-6 providers. The result is the service is cheaper, quality is better and speeds are faster than what you can get in the US. The market here is in desperate need of competition. Instead of helping the telephone and cable companies, we need to do something to force them to compete.
I am amazed to read an article with this strange perspective on CNet.
Having lived the last year in Germany, it is very easy to seem the problems in the US internet market due to the duopoly situation we have here. In Germany the options include a cable modem or DSL access from at least 5-6 providers. The result is the service is cheaper, quality is better and speeds are faster than what you can get in the US. The market here is in desperate need of competition. Instead of helping the telephone and cable companies, we need to do something to force them to compete.
I am amazed to read an article with this strange perspective on CNet.
Having lived the last year in Germany, it is very easy to seem the problems in the US internet market due to the duopoly situation we have here. In Germany the options include a cable modem or DSL access from at least 5-6 providers. The result is the service is cheaper, quality is better and speeds are faster than what you can get in the US. The market here is in desperate need of competition. Instead of helping the telephone and cable companies, we need to do something to force them to compete.
I am amazed to read an article with this strange perspective on CNet.
many justification, policy making, even patent filing, ECO pay
etc. etc.)
(2) overhang of the bubble in early 2000
(3) lack of tech roadmap, such as model in EU ACTS, to promote
consortium, many "me too" products
(4) lack of killer application, small and large alike due to
fragmented "competitive environment". e.g. tracking husband
proven to be $ generator for Korean, not sure will be good fit to
US.
Tracking kids may cause few law suits...
(5) The other country do not have mentality of "free". The
service has to be paid, what ever small fee is.... but the key is
not unwillingness to pay, but the MBA's unwillingness to charge
new service...(marketing got weak knee... carreer killer) and lack
of meaningful new service... (slowly sneak the fee upwords is
real... but not new service)... just look at the ipod music
download, as long as price at the right level...the useless
ringtone is another example of market success.
(6) The speed matters only for the same group of people... due
to lack of the new application (again... the lack of tech progress).
the same group of users "shopping around" DSL, cable, wireless,
etc. causes price instability (cyclic pressure of the price
downwords at bits/$). No body win in the situation.
(7) instability of the company... you can pay less for the duration
of those start ups, until they buff... company V as example... As
discussed before, the unwillingness to pay/to charge... many
resources wasted... just look at the M&A asset write down...
(8) instability of workforce... lack of continuous tech progress
due to loss of knowledge...
(9) etc. etc.)
- problems?
-
by 1st
July 4, 2006 3:49 AM PDT
- (1) many $ spend on overhead rather than real progress (too
-
Reply to this comment
-
Showing 1 of 2 pages (42 Comments)many justification, policy making, even patent filing, ECO pay
etc. etc.)
(2) overhang of the bubble in early 2000
(3) lack of tech roadmap, such as model in EU ACTS, to promote
consortium, many "me too" products
(4) lack of killer application, small and large alike due to
fragmented "competitive environment". e.g. tracking husband
proven to be $ generator for Korean, not sure will be good fit to
US.
Tracking kids may cause few law suits...
(5) The other country do not have mentality of "free". The
service has to be paid, what ever small fee is.... but the key is
not unwillingness to pay, but the MBA's unwillingness to charge
new service...(marketing got weak knee... carreer killer) and lack
of meaningful new service... (slowly sneak the fee upwords is
real... but not new service)... just look at the ipod music
download, as long as price at the right level...the useless
ringtone is another example of market success.
(6) The speed matters only for the same group of people... due
to lack of the new application (again... the lack of tech progress).
the same group of users "shopping around" DSL, cable, wireless,
etc. causes price instability (cyclic pressure of the price
downwords at bits/$). No body win in the situation.
(7) instability of the company... you can pay less for the duration
of those start ups, until they buff... company V as example... As
discussed before, the unwillingness to pay/to charge... many
resources wasted... just look at the M&A asset write down...
(8) instability of workforce... lack of continuous tech progress
due to loss of knowledge...
(9) etc. etc.)