Many people believe there is not enough competition in U.S. broadband access markets, which will come as news to the firms that actually compete in the market. But it's always easier to criticize somebody else's business than your own, one might observe.
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Sometimes the argument is that the alleged "lack of competition" means slower access speeds in the U.S. market, compared to some others. And the U.S. does feature typical speeds than some other nations do. With no exceptions, those nations are territorially small, have high population density and also tend to have had heavy financial sponsorship. The first observation means any advanced network can be built faster; the second and third observations mean any advanced network can be built more affordably.
The simple fact is that no large country, especially not any country with continental size, ranks in the very-top of broadband speeds. And there are simple reasons for that situation: Very-large networks, covering very large areas, with highly-varied population density, cost much more to build, and simply take longer.
Despite those background factors, the United States ranks about where you would expect, in line with the United Kingdom, France and Germany, for example, in most measures of broadband speed or coverage. The United States is not at the top, and likely never will be. The United States never ranked much more than 14th globally for fixed-line voice, either, and nobody seems to think voice service has been an impediment to economic growth, social equity or anything else.
The other issue is consumer demand. Broadband penetration in the United States in right in line with PC ownership. About a quarter of U.S. homes do not seem to own PCs, making broadband a rather useless product. Now that broadband adoption is up around the 70 percent level, most people who own PCs buy broadband.
The other angle is consumer demand for various speed tiers. There just isn't much demand for the fastest tiers of service, with most buyers purchasing services virtually all surveys indicate they are happy with. In other words, U.S. consumers choose services offering moderate speeds, and moderate prices, not the fastest speeds sold at the highest prices. Unless you think people are irrational, that sort of makes sense: people buy services that meet their needs, not "just because" faster speeds are available.
The FCC also notes that 66 percent of U.S. consumers already are buying access services running at bandwidths between 3 Mbps and 10 Mbps. Most service providers will tell you that this represents the bulk of current buying behavior. Will people buy services of higher capacity in the future? Most people think so. Are they likely to pay much more than they do now? Perhaps, but only if some other part of their current budgets can be shifted. There is little, if any, evidence that the percentage of household spending devoted to communications changes very much from year to year, running about 2.3 percent or so of budgets, and growing very slowly over time.
Broadband access is a means to an end. People might want the Apple iPad because it, in itself, is seen as having high value. Price has not been an impediment to robust adoption. But broadband access isn't that sort of product. There isn't the same "need" to buy the fastest service, as there might be to buy a Lexus.
One might argue that 3 Mbps is good enough for most people who pay with their own money. The Federal Communications Commission's latest report on the state of U.S. broadband access services took a look at locations by zip code, and estimated that 48 percent of U.S. households had, at the end of 2009, the ability to buy downstream service of at least 3 Mbps and upstream service of more than 200 kbps from at least three fixed-network providers. You might not say that is fast enough, or that three providers are not enough. Fair enough, but that's a value judgment.
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Some 44 percent had the ability to buy such service from at least two fixed-network providers.
About 22 percent of househoulds could buy service of at least 6 Mbps/1.5 Mbps from at least two providers, while 57 percent could buy from at least one provider. Some 20 percent of U.S. households could buy service of at least 10 Mbps from at least two providers, while 58 percent could buy service from at least one provider. Some work needs to be done there, but upgrades are on-going, and those gaps will be closed.
If one adds in wireless providers, the FCC found that 58 percent of U.S. homes could buy wireless service of at least 3 Mbps/200 kbps from at least three providers, while 35 percent could buy from at least two providers and six percent had at least one provider.
But what makes a market workably competitive? That might not be a tough question in the abstract. Most people would probably agree that multiple competitors in any market are good for competition, and therefore good for consumer welfare.
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Matters are tougher when looking at capital-intensive industries. But how much facilities-based competition is actually possible in the wireline or mobile broadband industries?
Some would argue from experience and study that much more than two or three facilities-based competitors in a fixed-neetwork business, in a large market, is about as good as it gets.
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