Why your Internet connection is too slow

July 23, 2007

In 2001, after the explosive growth of the Internet and online businesses in the 1990s, the United States had taken the lead online. In terms of percentage of the population with high-speed access, countries like Japan and Germany had half the penetration we did. France had less than a quarter.

Now, all three of those countries have passed us. We’re falling behind in providing high-speed access to the Internet, and just as importantly, our high-speed connections are much slower and more expensive than other countries.

How’d this happen? How did the U.S. go from setting the pace to falling far behind? Paul Krugman explains.

[T]he world may look flat once you’re in cyberspace — but to get there you need to go through a narrow passageway, down your phone line or down your TV cable. And if the companies controlling these passageways can behave like the robber barons of yore, levying whatever tolls they like on those who pass by, commerce suffers.

America’s Internet flourished in the dial-up era because federal regulators didn’t let that happen — they forced local phone companies to act as common carriers, allowing competing service providers to use their lines. Clinton administration officials, including Al Gore and Reed Hundt, the chairman of the Federal Communications Commission, tried to ensure that this open competition would continue — but the telecommunications giants sabotaged their efforts, while The Wall Street Journal’s editorial page ridiculed them as people with the minds of French bureaucrats.

And when the Bush administration put Michael Powell in charge of the F.C.C., the digital robber barons were basically set free to do whatever they liked. As a result, there’s little competition in U.S. broadband — if you’re lucky, you have a choice between the services offered by the local cable monopoly and the local phone monopoly. The price is high and the service is poor, but there’s nowhere else to go.

Effective market competition and effective regulation produced quality results. Then Bush took office.

Conservatives tend to disapprove of anything relating to the French, but Krugman notes all the advances France is making in this area.

[A]s a recent article in Business Week explains, the real French bureaucrats used judicious regulation to promote competition. As a result, French consumers get to choose from a variety of service providers who offer reasonably priced Internet access that’s much faster than anything I can get, and comes with free voice calls, TV and Wi-Fi.

It’s too early to say how much harm the broadband lag will do to the U.S. economy as a whole. But it’s interesting to learn that health care isn’t the only area in which the French, who can take a pragmatic approach because they aren’t prisoners of free-market ideology, simply do things better.

Maybe it’s time for this issue to play a bigger role in the presidential campaign? At a minimum, Senate Majority Whip Dick Durbin (D-Ill.) is putting it on the policy table.

With Bush alternating between pissing all over the constitution and destroying the planet, the broadband issue doesn’t seem terribly important. So I guess that’s what congress will probably decide to worry about.

  • Do you want to trust the same Big Government that screwed up Katrina to be in charge of the tubes for the Internets?

  • In Burlington, Vermont we have a municipally owned Telcom company with state of the art equipment and fiber optic that runs right up to your house. It’s still in its rollout phase- Should be at my house within 30 days!

    http://www.burlingtontelecom.net/

    We the people of Burlington own our own network because our local government cares about its people. Our telecom utility is a model for the nation.

  • Don’t you mean slowerd and more expensive? It seems like a really odd construction otherwise.

  • We’re falling behind in providing high-speed access to the Internet, and just as importantly, our high-speed connections are much slower and cheaper than other countries.

    Um … I think you mean slower and more expensive, right?

  • Is this why I have to copy and paste my comments three times before they post? 🙂

    The tubes must be clogged with oranges!

  • The Great Commander-in-Chief Guy, the Holy Fetus of Monarchy, the Chest-thumping Deciderer, the Bat, the Chimp — more like the Greatest Destroyer Ever. Does he know it? Does he even have a clue?

  • The faster and cheaper the tubes are, the more terrorist loving, redwhiteandblue hating liberal scum will be able to access the tubes and stir up trouble and provoke others to join in the fun. The Shrubites are baffled by the tubes so why push for improvements that will just allow their tormenters to beat up on them ever more fastly and cheaply.

  • CB, you have to be kidding me…

    When Clinton and Hundt were in office, the only wide spread service was dial-up via POTS (plain old telephone service) — think AOL. Sure you could pick dial-up carriers, but the service was slow and disconnects ran rampant. Since then, both the cable cos. and telcos have invested multiple billions of dollars of capital investments into their OWN networks to bring you high speed internet access throughout much of the US. Granted, technology has come a long way, but policy has not hindered broadband deployment by any means.

    Currently, some carriers like Verizon are deploying fiber right into the home in some metro regions. Moreover, wireless carriers have added high speed Internet service of their own and other companies are looking to deploy and offer Wi-max service through many of the urban markets and wi-fi service is readily available in many hotels, coffee shops, libraries, etc. Sure we’re paying $50-60/month for this high speed service vs. the $20 we used to have to pay the dial-up carriers, but we get over >10x the speed and the ability to download much richer content than the past. How the hell is this a step backward???

    What you are also failing to mention is that the Supreme Court, even pre the two Bush appointees struck down the provisions of the ’96 Telecom Act that allowed competing carriers to use their lines at pre-set, overly discounted prices as Unconstitutional. Any economist would tell you, without the incentive to make a profit on their new networks, there would not be an incentive for the Telcos and Cable Cos. to build the high speed networks (witness the collapse of the telcom industry in the early 2000’s).

    Sure, other countries lead the US on broadband penetration rates, but don’t nearly have the number of broadband users (the US is #1 in the world). Many of the leading countries subsidize their national carriers — something that even Clinton, Gore and Reed Hundt would not/did not propose. Moreover, many of the leading countries have much higher population densities, allowing easier connectivity to the inhabitants while the US is a very large and the population is much more spread out country on a relative basis.

    So there are many reason why the US lags in broadband penetration rates, but the current administration’s policy is not one of the leading reasons. Sure, I’d love to have broadband universally available, but at what cost???

  • Actually, the commercial mobile radio service (CMRS) market is one of the most free, most effective markets in any sector of the communications industry. There are a lot of reasons other countries have niftier apps and phones, but lack of a free market in domestic CMRS service isn’t one of them – indeed, there is a good argument that one reason other countries have those things that we don’t is that they have certain command features that our free market does not. (The CMRS market is deregulated to a greater degree than any communications sector except the Internet.)

    First, the competition. CMRS “lines” now exceed traditional landlines – despite the CMRS industry being only about 20 years old, a fraction of the landline industry, and being built out without the assured rate of return that regulatory monopoly provided Ma Bell and her spawn. Even most rural areas have 2-3 CMRS choices (compared to often a single full-service, facilities based landline provider and one, maybe two, cable companies); many metro areas have 6-8 CMRS providers. Price per minute of use (MOU) has dropped dramatically in the CMRS sector, much like long distance did after the 1984 breakup of Bell. It is the landline rates – particularly landline intercarrier rates that have not fallen.

    So if the CMRS market is so competitive, why do other countries have cooler toys? One reason is that computer, and laptop computer, penetration is higher here, so we don’t need the phone to do many of those functions. In many asian countries, the wireless telephony device serves as a mini-computer because it was more affordable and accessible than laptops. Most business travelers here have long had laptops – their own, or those from their workplace.

    Two reasons are linked to the freedom of the market itself. The market here for devices is larger in total than most other countries, but it is splintered because we use CDMA, TDMA, GSM and iDEN transmission formats. Most countries by command regulation have required use of GSM. Unfortunately, that makes GSM the de facto standard, even though many experts believe CDMA is the better format. (Betamax vs. VHS all over again.) Because we don’t command a winning technology, our market is more expensive to provide fancy toys to. The second free market issue is our view of the nearly absolute rights of private property owners. This allows frequent “hecklers vetos” of antenna locations, resulting in dead spots and coverage gaps (and complaints about the same which put carriers in a catch 22). This also diminishes the utility of gadgets that demand certainty, quality or speed of signal.

    There are also those intercarrier costs I mentioned above – those can make high demand, high continuity services expensive due to payments to wireline carriers – especially in rural areas where the rural incumbent wireline carrier is exceedingly protected.

    Finally, the nature of the consumer is different. Palm suffered when demand was nowhere near what it expected, Treo is constantly on shky financial ground. A handful of early adopters (who often are bloggers or blog frequenters as well – surprise surprise) complain, but businesses in particular are late adopters and business purchases many of the wireless devices. It is easy to overstate the demand – many market research firms have found that most in the US want their phone to be, well, a phone.

    So there are a lot of reasons we don’t have all of the whiz-bang wireless stuff SE Asia and the EU have, but lack of wireless competition is pretty hard to blame.

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