Tuesday, February 02, 2016

United States Is Still a Global Leader in Broadband

On January 29, 2016, the FCC released its Fifth International Broadband Data Report, showing that the United States is a global leader in terms of broadband coverage, subscriptions, prices, and speeds. This is impressive considering that the U.S. is very large geographically and has a low population density, relative to the other global leaders. Therefore, it is difficult to compare the U.S. to a small and densely populated country, like Singapore, because it is significantly more costly to provide broadband in the U.S. to all Americans than it is to provide broadband to all Singaporeans. Nevertheless, the U.S. fared well in the rankings.
Here are some of the report’s key findings:
  • At the end of 2014, 89 percent of households in the U.S. had access to high-speed broadband (at least 30 Mbps down), while only 68 percent of households in Europe had such access.
  • From December 2013 to December 2014, U.S. rural broadband coverage increased from 45 percent of households to 58 percent of households. In Europe, over the same span, rural broadband coverage increased from 18 percent of households to 25 percent of households.
  • The U.S. ranked first in the OECD in both fixed and mobile subscriptions, but that is mostly because it has the largest population. In terms of the percentage of the population, the U.S. ranked 16th out of 34 OECD countries in fixed subscriptions and 8th in mobile subscriptions.
  • The United States ranked 26th out of 40 countries in 2014 in terms of actual download speeds. The countries at the top of the ranking are very small geographically and densely populated. Singapore, Hong Kong, and Korea are first, second, and third, respectively. However, when compared at the state level, nine U.S. states ranked in the top quartile in 2014.
  • In terms of pricing, the U.S. ranked 7th least expensive out of 15 countries for fixed plans with speeds between 1 and 5 Mbps, 16th least expensive out of 27 countries for fixed plans with speeds between 5 and 15 Mbps, and 22nd least expensive out of 30 countries for fixed plans with speeds between 25 and 50 Mbps.

The prices of broadband plans in the United States are important for understanding how U.S. broadband providers have invested $1.4 trillion in broadband infrastructure since 1996. As broadband speeds increase, the United States’ rank among other countries in terms of prices goes down, meaning that prices and speeds are positively correlated. Because prices are scaled with the quality and quantity of broadband plans, such market pricing incentivizes broadband providers to invest in capital-intensive next-generation networks, while also allowing low-income consumers to afford basic level broadband plans. (See my April 2015 Perspective from FSF Scholars entitled “The Research is Clear: The U.S. Invests More in Broadband Than Europe” for more on how dynamic investment is the result of market pricing.)
The findings in the FCC’s report show that the United States is still certainly a global leader in broadband Internet access. (See this August 2014 paper by Roslyn Layton and me entitled “Innovation, Investment, and Competition in Broadband and the Impact on America’s Digital Economy.”) The data in the report stops at the end of 2014, which was just before the FCC adopted its February 2015 Open Internet Order. Although the U.S. may not lead in all categories, market-based policies over the past 20 years have incentivized broadband providers to expand broadband coverage, increase the quality of connections with faster speeds, and lower prices for consumers. Ultimately, this has led to more broadband subscriptions and satisfied consumers throughout the country.  
On the other hand, Internet regulations, like those in the Open Internet Order, could stifle investment and innovation among U.S. broadband providers, closing the gap between the United States and the rest of the world. (See my October 2015 blog for more on the adverse impact of Internet regulation on broadband investment.)