Jon Norwood

The United States Doesn’t Have Broadband

This article covers the current state of the broadband market in the United States as well as the negative impacts it may be having on the economy.

The technology that is now called the Internet was born in the United States.  ARPANET, the predecessor of The Internet created by the United States Defense Department, carried its first message from one computer to another in 1968.  Since that time packet switching technology has grown into the global phenomenon that is The Internet and has changed the way people live and do business forever.  Why then is the United States ranked 15th in the world for broadband penetration?  In France a broadband customer can get faster speeds for half of what customers in the US pay, and South Korea has throughput speeds 15 times faster than the US on average.  The United States is no longer leading the growth in this industry.

America’s lack of strategy is often cited as the primary reason broadband penetration is now lagging behind other parts of the world, as well as the governments lack of involvement or even interest is promoting growth.  IT would appear however that the culprit may be a lack of competition in the market.

Telephone companies and Cable Internet providers control about 97% of the broadband residential market.  The other 3% currently uses inferior technology that is more expensive and considerably slower than DSL or cable.  This is of course out of necessity as this small percentage does not have access to anything other than dial-up or satellite Internet.  Wireless Internet threatened to bring affordable broadband to the masses, however the two largest providers also dominate the DSL market bringing even less competition to the market.

The business community is faced with similar problems.  Most offices have access to a single provider for DSL or cable, and if a T1 is the best choice for the business the same company that would manage it is also the DSL provider.  This particular problem leads to higher costs and overcharges that have reached billions of dollars.

In 2004 President George W. Bush said, “We ought to have universal affordable access for broadband technology by the year 2007 and then we ought to make sure, as soon as possible thereafter, consumers have choices when it comes to their carrier.”  This statement suggests that the current broadband market in the US is having issues, however to date the services offered customers are too slow and much too expensive.  The FCC commissioner agreed and said in 2006, “Even in cities and suburbs, the fact that broadband is too slow, too expensive and too poorly subscribed is a significant drag on our economy. Some experts estimate that universal broadband adoption would add $500 billion to the U.S. economy and create 1.2 million jobs.”

So it would appear that the current state of the broadband market in the US is not only costing consumers too much money for an inferior product, but could be a significant cause in stifling the growth of the economy.  If this is anywhere near the mark, it would appear that now is the time for change.  If the FCC doesn’t take a long hard look at the Duopoly of the Telcos and the Cable providers it’s possible that the long term damage to the US economy could be significant.

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