For U.S. Consumers, Broadband Service Is Slow and Expensive

Our fate is being left in the hands of the Bells for Broadband will the world pulls away. You would think with all the technology we have we would get a good deal. But you how it is when greed comes into play.

For U.S. Consumers, Broadband Service Is Slow and Expensive

By JESSE DRUCKER
Staff Reporter of THE WALL STREET JOURNAL
November 16, 2005; Page B1

The good news for Web-surfing American households is that the cost of entry-level, high-speed Internet service is falling, thanks to competition between telephone and cable companies. The bad news is that even at these low prices you're not getting much for your money.

What passes for entry-level broadband service -- the most heavily marketed since summer -- is downright sluggish in the U.S. compared with that in many other countries; and not just in tech-crazed locales like Korea and Japan, but also in the likes of France.

The inferior value of U.S. broadband service becomes clear when you calculate the monthly "cost per megabit" of Internet access, or how much you pay to get a megabit's worth of download capability.

With Verizon, for example, entry-level broadband users pay $14.95 for download speeds of roughly 768 kilobits per second (three-quarters of one megabit), or a cost of about $20 per megabit.

In France, households can sign up for a $36 monthly service that promises download speeds of up to 20 megabits per second. Not only is that far faster than the Net access available to a typical American home, but it's also stunningly cheap at a cost of about $1.80 per megabit, or about one-eleventh that of Verizon's entry-level service.

What's more, says Taylor Reynolds, an economist with the Organization for Economic Cooperation and Development, French users get unlimited Internet calling to domestic landlines and 100 TV channels for the fee. "Once you start comparing what's available in other countries, it starts to make you realize, 'Wow, some people have it really nice and pay really little,' " says Mr. Reynolds, adding he gets 7 mbps download speeds even in the countryside.

France has strict "unbundling" rules that force big carriers like France Télécom to make their networks available to other companies offering Web services. That means competitors install their own DSL equipment in the network, but can use the telephone company's copper wiring into people's homes. In the U.S., unbundling is a dead issue because of heavy lobbying by telephone companies.

While entry-level download speeds in the U.S. lag behind much of the world, the situation is worse with upload speeds. This has hit home in the Drucker household since I started sending pictures of my five-month-old son to his grandparents, waiting impatiently for the photos to leave my PC. Uploading digital camcorder movies of Hank would be even more annoying.

Sharing video is just one of the uses of faster upload speeds. Other applications include home health-care remote monitoring, which lets a doctor keep an eye on you in your house.

So what is the U.S. doing about all this? The White House and the FCC say they want universal, affordable broadband by 2007. But the policy is being left in the hands of the cable and phone companies that control at least 93% of the country's broadband market.

The very definition of broadband in the U.S. isn't keeping up with the increasingly sophisticated ways a consumer uses the Web. The FCC defines "high speed" as 200 kilobits in at least one direction. That may have been speedy in 1995, but it's pretty pokey in 2005, when speed should be measured in megabits -- at least five times as fast -- instead.

Michael Gallagher, head of the National Telecommunications and Information Administration, the U.S. Commerce Department arm that advises the White House on policy, says the best way to get universal, affordable broadband is to leave things to the competitive market.

Defenders of this approach point to the fact that Bell telephone companies also offer faster DSL for more money, plus are rolling out new residential fiber offerings, led by Verizon's new Fios service. For $49.95 a month you get up to 15 megabits a second, download, or about $3 per megabit. That's a move in the right direction toward the overseas offerings.

The new service gets good reviews, and Verizon plans to make it available to six million homes by the end of next year. (SBC plans to have its fiber offerings available to 18 million homes by mid-2008.) Also, recent court and regulatory decisions unfavorable to Internet-service providers are prompting others, like EarthLink, to offer a wireless broadband alternative.

Some on Wall Street are skeptical: The aggressive fiber rollouts could suffer if Bell stocks continue to slide. And it would be hard to blame the companies if they did slow down. The Bells, after all, have a duty to shareholders to pursue maximum profits -- not necessarily to fulfill the goals of Internet advocates.

In the end, even talking about market forces in telecommunications is misleading. Phone companies, for example, get billions of dollars in federal and state subsidies for rural service; they also have teams of lobbyists and attorneys to influence policy. As cities try to introduce competing wireless networks, traditional telecom providers lobby to restrict such plans.

The U.S. needs some big-picture thinking by policy makers about broadband. The first thing they need to do is admit that U.S. broadband isn't keeping pace with the global market.