The State of U.S. Broadband: Is It Competitive? Are We Falling Behind?

Advocates for new regulation of the U.S. broadband Internet base their case on the related contentions that (i) our nation lags behind the rest of the world in quality, price, and deployment of broadband, and (ii) the market for U.S. broadband service is not competitive. This paper analyzes the latest U.S. and international data on speed, price, profits, and investment, and concludes that both of these contentions are false.

As to the first component of the advocates’ argument: the U.S. ranks 10th in the world in average broadband speed among nations surveyed by Akamai, and trails only South Korea and Japan among our major trading partners, countries with extraordinarily high urbanicity. We trail only Japan in the G-7 in both average peak connection speed and percentage of the population connection at 10 Mbps or higher. On price, the record is even more clear—the United States has the most affordable entry-level prices for fixed broadband in the OECD.

Other measures also belie the claim that U.S. broadband lags behind our international peers. Our per capita investment in telecom infrastructure is 50 percent higher that of the European Union, and as a share of GDP our broadband investment rate exceeds those of Japan, Canada, Italy, Germany, and France.

In short, when looking holistically at data on rankings, investment, prices, and affordability in their entirety, no evidence suggests that the United States is an underperforming dullard sitting in the back row of the broadband room. Our networks are faster, our prices more competitive, and our investments larger than mostof the world’s other major industrial nations.

The second pillar of the critics’ argument is also tenuous. U.S. broadband is provided in a dynamic, quickly changing market marked by dramatic shifts in products, services, and competitors, and breakneck innovation. In such a market, the best evidence that competition is working and producing good results is the high quality of service and affordability that we see in the United States today. Critics often claim that the purportedly “small number” of broadband providers is evidence that the U.S. market is uncompetitive, although the significant capital costs of creating these networks, while limiting the ultimate number of providers, also compels them to compete to rationalize their investments. And to the extent that a narrow focus on the number of competitors in the market has any relevance, it is noteworthy that 90 percent of Americans can choose between at least one wired and one wireless provider offering four Mbps broadband, and 88 percent of Americans can choose from at least two different wired services providers.

Moreover, the profit margins of U.S. broadband providers are generally one-sixth to one-eighth of those companies (such as Apple or Google) that use broadband, contradicting the idea of monopolistic price-gouging by providers.

The result of this competition is that 96 percent of U.S. households have access to speeds equal to or greater than 10 Mbps, and 99 percent of Americans can now access service of at least 3 Mbps. Over 50 percent have access to service at 100 Mbps or more. This perhaps is the best evidence that critics of U.S.broadband performance misrepresent the state of broadband in America today.

We should want U.S. broadband to be diffused rapidly, priced reasonably, and used to build social, political, and economic citizenship. The evidence presented here shows that the current approach to broadband regulation is serving these goals admirably. To go further, we will need government to develop policies and programs that achieve these goals in a way that supports the current regime of high investment and continuous innovation by competitive broadband providers, not in a way that would limit or upend it.

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