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Why broadband costs so much

Researcher Yochai Benkler explains why broadband Internet access is cheaper in other countries than it is here:

Last year my colleagues and I did a study for the Federal Communications Commission showing that a significant reason that other countries had managed to both expand access and lower rates over the last decade was a commitment to open-access policies, requiring companies that build networks to sell access to rivals that then invest in, and compete on, the network.

These countries realize that innovation happens in electronics and services — not in laying cable. If every company has to dig its own holes, the price of entry is too high and competition falters; over time, innovation lags, and the goal of broader and better access suffers.

I think this is a problem that is endemic in America. While we talk about the free market, the conditions for productive competition that benefits consumers are not present in many cases. For example, in America we have privately owned insurance companies and hospitals. If your state has only one private insurance provider and your town has only one hospital, there is no opportunity for competition to drive costs down.

6 Comments

  1. Yeah. In the US, the “free market” is code for “letting one company crush and illegally lock out all competitors through regulatory capture and outright fraud.”

  2. The government has created this problem with Certificate of Needs laws, exempting insurance companies from anti-trust laws, etc. I’m so glad that they are going to fix those issues with this health care bill.

  3. You can only take on so many special interests with one bill.

  4. Several years ago I lobbied Town Council (Chapel Hill, NC) to tag-a-long with a NC Dept. of Transportation project which was laying fiber to each of the 100+ signalized intersections in our community. For a very modest cost, NCDOT would lay a completely separate loop for the Town (the big sunk costs in such a project is digging hole, etc.).

    The idea was to have an asset – a fiber loop within 1000′ of %90+ of homes, %100 of the business centers – that was owned by the community that could be “leased out” to a variety of vendors who would compete not based on who owned the pipe but levels/types of service.

    It was many years coming, but Chapel Hill starts this June on the project. Hopefully by this time next year we’ll have a level playing field for competition.

  5. We could have universal broadband (funded by the Universal Service Fund), universal VOIP, and fiber in every urban area without any particular problem. But it would require a little government poking, so it didn’t happen from 00-08 because Government Poking Is Bad.

    Hopefully we can get it together in the next couple of years. It’s embarrassing to live in the Bay Area in the middle of a city and have 10Mbps cable or 6Mbps DSL be my best options.

  6. Indeed it’s embarrassing. I live in Romania as a Romanian. Your problem is that you don’t have an open market + you embraced weird technology. I mean, adsl penetrated here, only in small rural communities. Everyone else in a 60k population town has fiber-to-the-bulding then point-to-point-over-ethernet. It’s a lot cheaper and it goes to 100mb. And a strong concurrence between ISP. Literally I have cable from 3 ISPs/Cable hanging at my flat-door begging me to change to them. And a pure romanian innovation. All major ISPs are interconected and the offer internet int two flavors transparently (external traffic it’s limited at say… 40 mbps and actually more important for our needs romanian traffic to 100mb technology limit for 8 Euro (eight). For 20 i can get 100 External/romanian but i don’t need. The romanian traffic…here’s the catch.. we don’t like to pay for media… so we download it from trackers. And there’s why: i can get an 1080 movie ~4Mb, whatever i like, when i like, with the anoing intros riped, and get it to play on my plasma in 2 minutes. I have not time to make the popcorn!. I never payed a disk or software in my entire life (31 yo), Should i feel guilty? I don’t know. I’ll probably spend ages to get it legally, if i ever. The moral? The needs, circumstances and cheap fiber running chaotic across the flats buldings brought as where we are. But we are the 3rd or 4th in speed terms in the world.

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