Bad Comparisons Distort State of US Broadband

Admin, Tuesday, July 12, 2022
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For years, U.S. broadband has received a bad rap by comparing it to the European market. That rap — and the comparison it’s founded on — is dubious, according to a report released Monday by a D.C. tech think tank.

Comparisons between U.S. and European broadband prices abound, but their respective markets are built on such entirely different cost structures as to make any comparison between the two meaningless without accounting for the differences in necessary expenditures, noted the report by the Information Technology & Innovation Foundation (ITIF).

Costs for U.S. broadband providers are 53% higher than their European counterparts, the ITIF reported, driven by higher labor costs, taxes, advertising and payments for spectrum licenses.

It added that American providers also spend more on capital investments, spending more both on an overall and per household basis than European providers, who have the benefits of lower taxes and government subsidies.

Another criticism of U.S. providers — that they artificially inflate prices to pad profits — doesn’t hold water, either, the report maintained, since average profits among European providers are higher than their stateside counterparts.

“The U.S. telecommunications marketplace is very different from Europe,” observed technology analyst Jeff Kagan. “So, comparing them makes little sense. It’s like trying to compare a pizza to a fried chicken.”

“The European model has the government involved more closely,” he told TechNewsWorld. “When the government is part of the mix, the quality is lower.”

End Unproductive Comparisons

The report explained that broadband populists in the United States have argued that the U.S. broadband system, through which most people receive broadband from large, private telecommunications or cable companies, is deficient.

For most, though, it continued, their animus goes beyond the practical to the ideological. They see broadband as something that inherently requires a strong government role, not a private sector one.

To advance their case, the report noted, they argue that the U.S. system underperforms other nations and regions, especially in Europe, where the EU has imposed strict network unbundling requirements on incumbents.

But as this report shows, it added, comparing EU and U.S. broadband is fraught with difficulties, and the most important one is that any such analysis inherently involves comparing “apples to oranges.”

It’s time to end the unproductive EU-U.S. broadband comparisons and to put the misguided belief that the two structures are comparable to rest, the report declared.

“Consumers aren’t comparing themselves to Europe,” maintained Bruce Leichtman, president of the Leichtman Research Group in Durham, N.H., which specializes in research and analysis on the adoption of products and services in the broadband, media and entertainment industries.

“They’re comparing themselves to what they get, and they’re generally satisfied with that,” he told TechNewsWorld.

More Literacy Needed

Should the U.S. revamp its broadband policy to more closely align with the EU model?

Jessica Dine, a research assistant for broadband policy at the ITIF and a co-author of the report, thinks not. “Right now, most of our focus should be on ensuring that every state participates thoughtfully and wholeheartedly in the existing programs designed to encourage deployment and adoption,” she told TechNewsWorld.

“The money is already there,” she continued. “The real question is whether it’ll be used effectively.”

Dine explained that while some rural areas likely won’t be served without subsidies, the $65 billion allocated to broadband through the Infrastructure Investment and Jobs Act enacted by Congress should really be enough to finally close the digital divide.

“For a while now, some of the biggest gaps in American broadband access have been on the adoption side, not deployment,” she said. “So there is good reason to pull back on funding high-cost locations and instead focus on programs like Lifeline to help needy individuals regardless of where they live.”

“We should also reimagine the program to go beyond reducing costs of internet access at the individual level to also encouraging digital literacy,” she noted.

Leichtman added that in the surveys conducted by his firm, only 1% of respondents said they wanted broadband but couldn’t get it.

“The number one reason for not having broadband is not availability, not cost, it’s lack of need,” he asserted. “And the reason for lack of need is computer literacy. It’s older people and poor people without computers.”

“If we make it all about availability, we’re really missing the root of the issue, which is computer literacy,” he said.

Unwarranted Fear of Falling

The report also noted that critics of U.S. broadband contend failure to emulate Europe’s approach to the technology will result in the country falling behind the pack of developed nations when it comes to high-speed internet access, capacity and prices. Dine disputes that.

According to a report from the European Telecommunications Network Operator’s Association, she noted, U.S. broadband had an average fixed downlink speed of 199 Mb/s, significantly higher than the world average of 108 Mb/s.

In the mobile area, she continued, the average U.S. downlink speed of 96 Mb/s beat both the European and world averages. What’s more, U.S. 5G coverage at 93.1% of its population is higher than both Europe and Japan, and barely below South Korea.

She added that U.S. high-speed, fixed broadband coverage in 2020 was 98% of households compared to 87% in Europe.

“While prices are more difficult to compare directly, U.S. prices are falling,” she said, citing the “2022 Broadband Pricing Index” by USTelecom. It shows that U.S. providers’ most popular speed tier of service fell in price by 14.7% from 2021 to 2022, when adjusted for inflation, and the price of the fastest speed dropped by 11.6%.

Flawed Comparison Persists

As flawed as comparisons between the European and U.S. broadband markets can be, they continue to persist. “There seems to be an enduring belief that to assess something accurately you need to compare it to the competition,” Dine said. “In this case, it’s appealing to look between U.S. and European broadband offerings to argue that one is doing better than the other.”

“That’s not necessarily a bad approach when it comes to areas that are actually comparable between countries, and it can be a helpful way to pinpoint flaws or approaches that should be followed,” she observed.

“As this report points out, there are a lot of underlying differences in the regulatory, economic and geographical foundations of each country’s broadband market,” she continued. “Taken together, these constitute such major differences in the cost inherent in deploying broadband that it isn’t necessarily helpful to compare prices without taking costs into account.”

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