Victor W. Pickard's picture

Competition, Consumer Choice, and the Cost of Connectivity

Co-written with Sascha D. Meinrath of the New America Foundation

The Internet is not a luxury, it is a necessity. As a lifeline to crucial resources for millions of American families, businesses, educational institutions, and municipalities, high-speed Internet should no longer be considered a commodity, but rather a critical utility on par with water and electricity. Our national policies should reflect the importance of connectivity and prioritize universal affordable access for all. But instead, many policymakers have looked on while our international ranking for Internet adoption has plummeted, leaving millions of Americans offline.

Our current path leads inevitably to a tiered society, one divided along unequal opportunities for education and work, as well as access to arts, culture, and a higher quality of life. This divide runs exactly counter to the ideal of the American Dream. According to this vision, our nation was not designed to maintain an aristocracy and a permanent underclass, but was supposed to be a meritocracy where anyone could succeed and everyone was given the tools they needed to create a better life for themselves and their families.

Universal broadband should be a national imperative, particularly for rural, low-income, and other underserved areas. As the Internet rapidly becomes the platform for a growing percentage of all media, broadband connectivity serves as the critical infrastructure of the 21st century. It is too precious a resource to be solely overseen by an oligopoly of profit-driven corporations who care for their bottom line first and foremost. Our lack of foresight and attention to ongoing digital divides harms our economy and future prospects not just among marginalized constituencies within the United States, but also in relation to our international competitiveness.

Unfortunately, in too many markets across the U.S., people are at the mercy of duopolies, granted a choice between one cable provider and one telephone company for their Internet services. This lack of choice and competition is the key reason why broadband services in the U. S. have lagged behind a growing number of other industrialized countries and why customer service has been so remarkably substandard where broadband connectivity is available.

This massive market failure largely accounts for the fact that Americans typically pay twice as much (and often 1000% as much) for half the speeds compared to people in other countries. In 2008, a 100 megabit per second symmetric connection in the U.S. is likely to cost hundreds, if not thousands, of dollars per month. This compares with $25/month in Japan, $32/month in South Korea, and $35/month in Hong Kong. And it’s not just Asian countries who are pulling rapidly ahead of the U.S. In Sweden and Romania, open access networks have created vibrant competitive markets, dropping the pricing for 100 Mbps symmetric lines to $16/month in Stockholm and $11/month in Bucharest.

Imagine if you could get broadband connectivity that is an order of magnitude faster for a tiny fraction of the price. This pattern is borne out in a growing list of countries—where competition is fostered, pricing drops and broadband speeds increase dramatically.

The U.S. has thus far failed to grasp this lesson, but it doesn’t have to be this way. If the U.S. government elevates affordable Internet access to a top priority and expands open access infrastructure requirements, all Americans will have an opportunity to better their lives and pay prices equivalent to many other countries.

The U.S. government must create the same conditions that other countries have fostered—anything less will ensure that the price-gouging of American consumers will continue. Buildout of open access wireline infrastructures and increased unlicensed access to the public airwaves is the logical place to start. In addition to fostering increased competition, an open internet architecture needs to be protected by maintaining interoperability, network neutrality, and non-proprietary protocols.

Taken together, these measures will help ensure an open, affordable Internet that is available to all.