Tuesday, May 17, 2016

High Speed Access: U.S. Behind, at Par, or Ahead?

Evaluating the state of Internet access in the U.S. market always is a contentious matter. These days, it also is a rapidly-changing matter.

Some argue the U.S. high speed access market is way behind some other countries, though it might be fair to note that virtually all those other countries are small, or compact, highly urban or places where access is subsidized heavily by the government.

The point is that it always is much easier for a city-state to boost its infrastructure performance, compared to any continent-sized country, especially any country with large areas that are sparsely settled.
Also, such comparisons also can change quite rapidly. Very soon, the U.S. will be the market with the highest percentage of gigabit per second availability, based almost entirely on the decision by Comcast--the largest U.S. ISP--to boost 100 percent of its connections to gigabit speeds.

Other U.S. cable TV operators also will do so, as the incremental cost is as low as $200 per location to upgrade to gigabit speeds.

Others point to the retail price of access, claiming that prices are high in the U.S. market. On a percent of income basis, though, U.S. prices are quite low.

Also, some continue to complain that consumers do not have enough choice when it comes to broadband providers. But there is a trade-off between competition and investment, because profits are affected.

According to Akamai’s recent State of the Internet report, all 50 states, plus Washington, D.C., saw increases on a year-over-year basis in average connection speeds, and those ranked among the top 10 experienced double-digit gains, says the Information Technology and Innovation Foundation.

“The fact that the U.S. broadband industry has achieved competitive speeds while also maintaining low entry-level pricing is remarkable considering the hurdles we face with sprawling suburbs, rural states, relatively low levels of computer ownership, and relatively high rates of poverty,” says ITIF.

But competition in broadband networks is not an unalloyed good—more competitors in a given geographic market is not always better, ITIF also says.

Having more firms with smaller market shares competing at low margins will necessarily raise overall production costs while reducing average firm revenues.

The result, therefore, will be higher prices overall.

As such, spurring more competition through proactive government subsidies or other policies is almost always less efficient in lowering prices and improving service than effective competition among fewer firms, the foundation argues.

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