This is one of the things I like ranting about, so I'll try not to do that.
I also live in an area that will never see high-speed internet. We were sold out by both the feds and our state legislators. You can argue that perhaps these government officials were misled or uniformed, but I remain dubious.
We were able to construct an interstate highway system. We were able to wire this country with electricity. We were able to wire it for telephones. The only reason we can't wire it with fiber is because of poor government management of eminent domain. We should kick most of those responsible out of office. To see a bunch of yahoos on TV telling me we need the road paved when most of their constituents don't have enough bandwidth to get high-quality instruction over the web? Or to work over the web? It's the Information Age, bozos. Something is wrong somewhere.
The worst part? I do not expect this to get fixed any time in the next couple of decades. Not only is it broken and hurting, but there's no political incentive to fix it. In fact the incentives run the other way.
It's not too bad. There are a couple of pipes and routes, not all go through Telstra. I usually get about 225 ms pings between west coast Aust to west coast US (~9,500 miles). It's fine for regular internet including downloads, but gamers don't like it (I guess much of that latency is just down to plain old distance rather than bandwidth).
So you're saying that the government, either knowingly or unknowingly, made decisions that, in the long run, adversely affected its citizens? No kidding.
Can you provide a single example of such a country?
Regardless, free-market capitalism is not predicated on freedom from government intervention; in fact, a government is necessary in order to protect the freedoms of the individual. That should be the purpose of the government: protecting the freedom of its citizens. Creating an environment that allows voluntary trade of goods and services to exist. Not picking winners or losers. Not imposing regulations that create monopolies. Not encouraging bad behavior by banks. Not rewarding bad decisions by auto manufacturers. Not being in bed with unions and corporations alike.
Here's how I think about it: What can one corporation do to a person? Not much. What can one government do to a person? Take away his freedom, imprison him, and / or kill him. Would I rather have flawed, power abusing individuals the power to impose their will over an entire country, or just their company? Would I rather centralize power in a way that is not accountable to anyone, or would I rather have power be decentralized and much more accountable to me?
No one is arguing for no government. But we are looking at the present state of affairs and the reasons we got here, and then looking at the past and seeing what happened then and why... and we're realizing that, for the most part, more government is bad.
Get back to me when you can point out a single successful country in the entire history of the world that actually operated on "Libertarian" or "Objectivist" principles.
Estonia (relatively) recently adopted policies supported by Milton Friedman. Along with that and being freed from the USSR, Estonia's economy is growing rapidly. Estonia adopted a flat tax rate that has been decreasing steadily over time. Estonia has extremely low public debt, free trade, a budget surplus, and had, in 2011, 5x the GDP growth of other EU countries (although they recently adopted the euro :( ). Estonia is doing quite well compared to the rest of the EU, despite all their damn economic freedom.
Regardless, how is "not many have tried it, therefore it doesn't work" an argument? On the other hand, one doesn't have to look very far back in history to see where too much government involvement into the economy (and therefore every day life) leads.
> Regardless, how is "not many have tried it, therefore it doesn't work" an argument? [...] If you would like me to put words in your mouth let me know.
You just did!
Demanding even a shred of evidence for a dubious claim is not the same as claiming that it doesn't work. It's a request for evidence, rather than just hot air.
As to Estonia, it's GDP per capita, is only 67% of the EU average and 17% of that of Norway, a socialist country. It does have high internet speeds, though, so you gotta get 'em props.
If we are going to experiment with completely unproven political and economic systems on our own society, I vote for a socialist anarchy. First order of business: eliminate corporations. Immortal amoral virtual people cause nothing but trouble!
I really don't think anarchy is something you vote for. Is more like the base state that exists already, as long as you can reliably avoid the people in silly hats.
And how are you going to eliminate corporations if you have anarchy? You would have to enact legislation backed by force, because a lot of people are not going to agree. Is a bit like some of the arguments I have with mates where they say they want to institute anarchy and ban money. To which I usually point out that firstly, banning money sounds a lot like an imposed law and that secondly, irrespective of my views on monetary systems and that they can probably be improved upon, if anyone tried to ban money, the first thing I would do is start a currency just to annoy them.
[edit] My view on money is that eventually it will be obsolete for acquiring many everyday goods, but remain for luxuries for a very long time, but the point at which I expect this to start to occur is still a reasonably long way off. The key technology that could start bringing this about is a fully automated farming and delivery chain driven off solar. I am mostly keeping a close eye on Brazil as the most likely candidate for schemes like this to be tried first, given the rapid economic development, political climate, and existing food security schemes like that in the city of Belo Horizonte. http://www.unesco.org/most/southa10.htm
Note, I am not against money per-se as I think that it was a vast improvement on what it replaced, I just think that it doesn't have the lowest economic friction for acquiring any abundant items that have negligible ongoing costs.
"how are you going to eliminate corporations if you have anarchy?"
I think that's a different issue. Corporations exist because of the law. Corporations shield the owners from personal liabilities, including debt. It is the law which prevents me from going after the owner of a failed company which owes me money.
So if there were no law, or no enforcement of the law, there would be no companies.
If there were no law, people with guns would make laws and enforce them. Without the government, the people with the most guns are likely to be companies as they already have the manufacture sorted.
All the ideas of trying to bring about anarchistic statelike systems seem to neglect the issues that sometimes hierarchy is very useful and can also be extraordinarily deadly if used aggressively.
I'm making a very limited point. Corporations exist only because we, through the law, allow them to exist. Groups of people (with or without guns) are not corporations. Pablo Escobar ran a drug trafficking organization. No one calls that organization a "corporation."
We could, if we wanted to, and through the law, eliminate corporations. In that case, you could still have organization run as partnerships or other means. This does not require anarchy in order to achieve.
If there were pure anarchy, with no government, then we would de facto have no corporations. That because we wouldn't have property ownership, limited liability, contract enforcement, and the other aspects which make corporations "exist."
That's why I suggest that getting rid of "immortal amoral virtual [corporations]" can be done without anarchy.
If there were pure anarchy, I'd give it less than ten minutes before someone sets up a state. States are ideas, and are as hard to get rid of as anything from Pandoras box. You cannot truly ban things, you can only ever hope to make them temporarily unfashionable.
The forcible enslavement of human beings was permissible and enforced by law in multiple states until 1865. Although you could quibble about whether the seceding states counted as part of the US from 1860-1865, slavery remained legal in Maryland until the passage of its 1864 Constitution, and it remained legal in Kentucky until the passage of the 13th Amendment. There were also some states, like New Jersey, in which the acts of enslaving a person and importing an enslaved person were illegal but the manumission of existing slaves was not required.
And it wasn't just chattel slavery. A whole lot of the non-chattel laboring class consisted of indentured workers and debt peons, as well.
But, as David Graeber put it, that's the point. The people who invented the anarcho-capitalist philosophy of self-ownership, or natural ownership of one's "liberty", mainly did so because they wanted to explain how one could trade away that very liberty for money.
I think that the future really is in wireles communications. What's the point of laying down fiber if in 10 years we can get wireless at the same speed?
Of course I'm assming that telco will actually compete in tthat domain... but considering how easy it is to switch serfices, I think it can only get more disruptive.
Wireless is a shared medium. There is a limit to how much you can push through the air.
Laying fiber once is long enough to last at least 100 years (based on what we know now). Should we not lay fiber just because wireless may eventually be as fast?
A good decision now is better than the best decision later.
And in those 10 years the amount of data you can mux into fiber pairs will have increased at an even greater pace. What do you think your wireless carriers are using as a backbone? fiber.
The fact that speeds of wireless providers have caught up to the average speeds of landline ISPs in most areas is just a sign of the corruption of the cable companies, not that wireless is a superior medium for data transfer.
Wireless will never be able to match the bandwidth of fiber. Today fiber can transmit close to 10 Tb/s through a single line. This is orders of magnitude more than will ever be possible with wireless.
You could say that about every service in rural areas.
If you tried to go all the way with your argument, only a few urban centres would be left with decent infrastructure. And of course infrastructure needed to support those (parasitic) centres (what with food and the like).
A rather gloomy picture of society, if you asked me.
>You could say that about every service in rural areas.
Well, I do ask that question about every service in rural areas. There are advantages to living in the countryside - traffic, clean air, cheap housing. If I'm expected to subsidize rural broadband, why aren't rural people expected to subsidize my housing costs?
If cheap, fast broadband is really important to you, why don't you move somewhere it's available?
Report from the field: On Friday I walked into a cell phone shop and told them I wanted a SIM mainly for data. They suggested a prepaid "all you can eat data" SIM good for one month (realistically it alerts at 15 GB usage). €20 ($26 USD). The €20 goes towards pay-per-minute and pay-per-text usage, but who calls or uses non-iMessage these days?
Back home, my Verizon bill will be $120 every month with one iPhone 5 and one LTE iPad sharing the same data plan (breakdown: $40 for iPhone 5, $10 for iPad, $70 for unlimited talk/text + 4GB shared data (or, replace $70 with $100 for 10 shared GB data for a grand customer abuse total of $150 every month)). You can't seem to even get non-unlimited voice/text anymore. Let's not bring up the $35 fee per device they charge to "activate" it either -- I don't want to headasplode in this room (it has white walls).
Data only, please. For under $3/GB, please. RFN, please, not in another 10 years.
Quite a few people actually. The former is rarer, but there is an increasingly large portion of the populace that doesn't use iMessage (considering it's proprietary to Apple). Sure, you can work around using Google Voice to SMS/Call over data, but that isn't for everyone.
Or use Google Talk, for fuck's sake. The protocol is open, and the service is very reliable. I got all my friends running iOS to get Vtok, and now they can chat with me too. And you don't have to be on a Mac to use it from a computer - just log into Gmail or use any Jabber/XMPP client you want. I haven't used any other messaging service in over 5 years.
The only thing I use Google Voice for is the one or two friends still using dumbphones.
Google Talk is also the protocol for chatting on Google+ (That is, it's the same chat as on Gmail). I've used it for a while to talk with friends around the globe; it's a great place to centralize quick chats/messages and video hangouts. I get Google Talk messages on my phone, and I can leave messages for them to see next time they log on to Google+ or Gmail. It's pretty sweet.
No, I mean the Google Talk mobile app allows you to make voice and video calls. I'm not talking about calling phones, I mean you can call other Google Talk users. You can of course use Google Voice on Android to make international phone calls if you want, as well.
You should be able to call any XMPP (Jabber) users if their server is federated (and they have a client with XMPP/Jingle support of course). I.e. not only to the users of Google's XMPP server.
I don't see what your point is. This conversation was never about phone calls in the first place. It was about VOIP to VOIP calls, which are of course completely free and unlimited to anywhere in the world if you use Google Talk.
If you accept the default prompts, it's enabled automatically on iOS 5, and, because it's keyed based on your phone number, also automatically used when messaging other iPhone users. Combined, not only do people use iMessage; it's resulted in a MARKED decrease in texting volume in at least the US.
Ummmm..... Whatsapp has had its issues with security and has been on Hacker News fairly recently, but I am not sure what you mean by interoperable IM network. Do you mean that it should be a webapp and that having an app on Android, iPhone etc. is not interoperable enough?
Or was that just supposed to be a jab at Whatsapp for no apparent reason (and a bit out of context)?
Interoperable solutions should use a standard protocol and be able to communicate with other servers. Like e-mail for example. For instant messaging such standard is XMPP (Jabber), and when server has federation enabled - it allows communication with users of other XMPP servers.
"Having an app" for various OSes is not called interoperable. Going back to e-mail analogy, one can expect to use any e-mail client, and to send messages to users of any e-mail server. Without any need to use one kind of client and being restricted to communicate with users of one e-mail server only. The same thing should be in the field of instant messaging, and such thing is already possible with XMPP.
Those who proliferate non interoperable networks (Whatsapp, iMessage or whatever) - are plain wrong and should be ashamed doing it in this day and age.
Looking at history - e-mail had to overcome the same problem. At some point, major public e-mail services were walled, like AOL and Compuserve not being interoperable. Luckily today for e-mail such thing is unimaginable. But with IMs - it just persists. And in big part, those who create new walled networks can be blamed.
If I want to use the iPhone 4S on T-Mobile's network I am stuck using edge only because of incompatibility between the GSM networks (thank you FCC!) and which bands are available to whom.
If I were to want a plan with AT&T that offered me what I have now (450 minutes a month, 2 GB of data and unlimited texting) I'd still be out 90 USD per month whether I purchased my own device or not because AT&T doesn't do discounts for bring your own device customers (T-Mobile contract customers can get a discount for bring your own device, or at least that was the case when I was a customer with them. Knocked $20 off the price off a contract).
I'd be more than happy to purchase a phone outright and pay MUCH less per month.
My sister has an unlimited data plan, 400 minutes a month and unlimited texting for a grand total of 40 EUR in The Netherlands with T-Mobile. She doesn't talk much, but texts and iMessages a crap ton and uses about 6 GB's of data on average listening to streamable music and online radio stations. At the current exchange rate that is 50 USD. Do note that her phone is subsidized as well, also it comes unlocked so she can move carrier when her contract is up without issues.
I recently canceled my AT&T contract, paid my ETF, bought a straighttalk SIM, and now $50/mo ($45 plus taxes.) for 'unlimited' service. It works without unlocking because straighttalk is an AT&T based MVNO (or at least the sim I bought from them is.). It's not perfect, but I'll make back my ETF in four months.
You might be on the AT&T cell network, but you're being proxied onto StraightTalk's gateway to get out onto the Internet. And that's the part which sucks. :)
T-Mobile is retooling their network to give HSPA+ speeds to iPhone users. This should be done by the end of the year. I am considering leaving Verizon for their bring-your-own device plans with my iPhone 4S. These plans are around $45/mo for 5GB data and more voice and texts than I can use. The only thing holding me back is their insistence on getting me to sign a 2 year contract. I've been on Verizon for 10 years and know nothing about T-Mobile's level of service. I would not want to lock myself into a contract with them without the ability to leave at will.
> T-Mobile is retooling their network to give HSPA+ speeds to iPhone users. This should be done by the end of the year.
According to the t-mobile reps I spoke to, their refarming project will only be finished in a few cities by the end of 2012 (LA allegedly included, although in the past t-mobile reps also promised this would be done by September so YMMV). The nationwide project will take all of 2013, so don't hold your breath. I'm about 30 days away from dumping them and going with Straight Talk.
I use that plan right now. It's pretty nice. 100 minutes is a little short for me, but it's $0.10/minute after that. My first two months' bills were $33 and $35, even with the minute overages.
There's no plan on that page under $50/month. And the $50/month plan (which I currently have) includes first 100 MB (!) at 4G, after which the data is at 2G.
As a data point, I pay about $15/mo for 8GB of wireless data + 50GB during night hours. HSPA+ speeds, realistically I get 4-6Mbps down and 2Mbps up on average. That's in Poland.
I guess Americans lucked out on amazingly low hardware prices, so that's why you have to get ripped off on data plans :-)
Back in the States, I paid $50/month for T-Mobile's unlimited-everything monthly/no-contract plan. There was an additional $10 fee for international calling, if I wanted it. This plan was later grandfathered out, leaving the only similar plan being one where you get on a contract and buy a new, SIM-locked device. Before it was grandfathered out, Consumer Reports ran an article on the under-appreciation of no-contract SIMs in America.
Where I am now (Northern Israel), the government passed a law against lock-in contracts last year. As a result, there has been a "cellular revolution". My new SIM, which might arrive in the mail today, costs 99 shekels per month (roughly $25 USD, but the shekel has been tending to rise against the dollar faster than the Central Bank can buy American bonds to keep it down). It includes unlimited calls, text and data, including international (to my American family) for no additional cost.
The internet service I have here, coupled to minimal public-access television service, is 10 Mb/sec download speed for 65 shekels ($16.25 USD) per month. The providers of physical internet infrastructure (cable and DSL) are also separated here from ISPs. A competitor to my DSL company offers 100 Mb/sec for 20 shekels ($5 USD) per month, but isn't available everywhere. This DSL company will upgrade you to 20 Mb/sec if you catch them offering a sale.
By contrast, a minimal cable package of public-access channels and broadband internet back in the USA cost about $45/month, before you've paid any other bills, and it gave you about 3-5 Mb/sec.
(Admittedly, these prices reflect household incomes being lower here, since the average worker's salary is something like $28k/year and most households have two working parents. But the way America has been going, those kinds of numbers are now typical there too, but without prices having gone down.)
So yeah. America gets gypped because its government consistently refuses to do anything about telecom infrastructure. It's pretty sad, considering how little you actually have to do to get decent results.
This doesn't seem to be brought up in the thread, which is surprising:
What about wifi? This month I've cancelled my $70/mo 6GB data/150 min talk service with Fido (Canada) and switched my iPhone to a prepaid SIM. Mostly because I've realized that 99% of the time I need data I am very likely to be reading, coding, or otherwise consuming, in which case I'm probably at home, at a friend's place, at a café, or generally a wifi equipped spot.
It's not a real solution if you do need data everywhere you go, but I recall reading that wifi is much cheaper to build a larger infrastructure from; hence all the city-wide wifi projects I suppose. Can anyone with an insight chime in?
I've read this same article for the past 10 years now and every time I ask the question: what about fees and taxes Europeans pay apart from their bill? The US system is horrible but I think for a complete picture it would be good to know exactly what taxes and fees pay for the infrastructure in other countries.
As a kid in Germany every household with a radio or TV had to pay a fee to operate those devices and there was a constant barrage of ads reminding new households to register and pay up. I'm assuming there are also other taxes that flow into building communications networks in Europe.
You're comparing apples and oranges. The TV licenses are funding for the public broadcasters to provide programming. They do not go towards laying cables into people's home for cable tv reception and do not fund cell phone towers. It is quite irrelevant to bring into this issue.
In American terms: The TV license pays for PBS programming, it's not a subsidy for Comcast to lay cables.
Not quite right. For the UK, £300 million of the licence fee budget (over the next couple of years) will pay for the roll out of high speed internet to rural communities. I doubt the BBC wanted to do it, but it looks like they'll be subsidising ISPs.
How is that different, from the US system? We pay cable companies $80/month, and they pay $60 to content producers. Does it really matter that Downton Abbey is publicly (ITV) funded, and Breaking Bad is privately (FX) funded? The £145.50/year UK color TV licensing fee must be included when comparing costs.
A similar thing happens with the discussion about gas prices, except the schema is reversed. In Europe, infrastructure fees are paid at the pump. In the US, a lot of our income taxes go to paying for those road fees and maintenance.
I was a bit skeptical that road costs took a lot of our income taxes, so I looked it up. It was, at least, more than I thought it'd be. The U.S. will spend $65.3 billion of income tax payments on ground transportation costs in fiscal 2012, at least half of which is on highway costs.
I think pricing for a lot of things has a large component of historical pricing in it.
My favorite example: the price of books in the US and Canada. Just grabbed a random recent hardcover off my shelves. It's labeled "USA $25.95 Canada $32.50". I believe that price differential got established back when the US dollar was worth $1.25 Canadian -- but it still exists, even though the two currencies are now roughly on par. It's the exact same product with what is effectively a 25% markup for Canadians for no good reason.
True, but that's true in the US too. Unless you're suggesting many bookstores in Canada routinely offer a 25% discount on most books, my point still holds.
In theory, yes. But it hasn't been raised since the 90's and since it's a per-gallon tax and not a percent tax, its funding has decreased as Americans buy more efficient cars and thus fewer gallons of gas. I don't have links, but I've seen graphs indicating that the fund regularly runs at a shortfall now, and getting worse.
UK: The TV licence costs £145.50 per year. The bulk of this goes to the BBC to produce TV and radio programmes and to operate their network of transmitters. None of this money is going for Internet connectivity to homes so far as I am aware.
The 'local loop' to the home is provided by Openreach(BT) who have to make connections available to any company at an appropriate rate. There are also cable TV networks in many towns and cities.
No such fees and taxes on radio or TV in The Netherlands, income tax was raised a little when it was abolished, but income tax compared to the US is already higher due to the amount of social net that exists for the Dutch populace.
The amount of fees and the costs I pay in America versus what I would pay in The Netherlands is absolutely mind-boggling.
> The amount of fees and the costs I pay in America versus what I would pay in The Netherlands is absolutely mind-boggling.
Are you including health insurance? I'm pretty sure that I'm paying significantly less in taxes in the UK than I would be in the US with federal and state taxes plus health insurance.
Your employer might pay for health insurance, of course, but someone is paying.
What about fees and taxes Europeans pay apart from their bill?
I'd also like to see a fairer comparison here. If telecommunications infrastructure in these leading countries was subsidized by tax dollars, as the following article suggests they were, those payments should also be figured into the price of internet. These numbers are harder to get, but you're right that omitting them is disingenuous.
Yes, but I think he's speaking about some other taxes, like the infamous (to french people) "redevance audiovisuelle". The ~120€ tax that you pay annually for owning a tv set. But actually, here in France, this tax only subsidize the French Movie Industry and the Public TV Channels (Fr2, Fr3, Fr4, FrO, Tv5, France24 etc.), not the broadband connection.
Still, the broadband connection is subsidized by the gov, so somewhere there are taxes being collected to pay for it. But does it justify the 4 fold price markup in the US ? I don't think so.
I pay around $10/month for phone line and around $10/month for unlimited 8mb adsl internet in the UK (annoyingly, I'm just out of fibre region where it would be faster).
I'm not aware of paying anything extra for fees, nor being forced ads.
That fee in Germany is not a connection fee, though. It is used to finance national television and radio. I still don't like it, and it has some scammy aspects.
OK, but we generally can't get foreign speeds at any price. It seems that other countries are getting something for what they pay, whether retail or by tax.
Can't watch the video right now, but the summary at the bottom mentions France and Bulgaria - does it bother to mention the geographic differences between the US and those countries? I feel like a broken record every time this discussion comes up, but no comparison is complete without addressing the differences in geographic distance and population density that US providers are dealing with.
Every analysis I've seen does compare geographical differences, and finds that that's not a major factor. If that was a big factor then you would expect that either 1) the US northeast is a hotspot of cheap high-speed internet, or 2) there are no regional providers and the national providers are required to have the same coverage for all their customers. This is not the case.
Why doesn't NYC have 100 MBit to the home, when Singapore (population 5 million) does, and can get it for US$50/month?
Looking now, Cablevision serves the New York tri-state area. Their fastest rate is $45/month for "50 Mbps for downloads and up to 8 Mbps for uploads." Comcast has a much larger range. They offer 50 Mbit for $115/month and 100 MBit for $200/month.
Telia is a Swedish ISP. They offer 100Mbit for $50/month and 100/100 for $60. That's for the cities. So we see that a Swedish ISP can provide higher bandwidth, for cheaper, than two of the ISPs in the biggest metro area in the US.
I then pulled up Telia's numbers for the town of Skurup, population 10,000 in the Swedish countryside. They are limited to 30Mbit, also for about $50/month.
The south of Sweden is densely packed, for Sweden, with 290 people/sq mi in the county. The country is 54/sq. mil. That's about the same density as Pennsylvania. Is it possible to get 100 megabit to your home in Pittsburgh? For under $100/month? Likely not. Why not, when it is possible in mid-sized Swedish cities?
Don't autoplay the frigging video! (Maybe some editor can modify the title to warn us?)
I hate sites that start playing video without my asking. Doubly so ones with loud noise. I have sound on my computer for things that really need to get my attention. Not because some site wants to interrupt me and everyone around me.
I wish there was a way to vote this link down so that other people who will be similarly jarred wouldn't have to experience it.
If you use Firefox, you can set plugins.click_to_play to true in about:config. Of course it won't help for HTML5 content which starts playing automatically, but it can improve performance with making Flash playable only on demand.
I have sound on my computer for things that really need to get my attention. Not because some site wants to interrupt me and everyone around me.
Why do you expect websites to conform to your expectations? There is nothing inherent about the web that suggests it would. You'll save yourself a lot of trouble by being proactive rather than waiting for the world to catch up to your standards.
While I don't like paying a lot, and I wish my Internet service were faster, I think the article was sensationalist to the extreme, and remarkably light on facts.
The author hasn't provided any reason for us to believe that prices or services should be comparable between countries. First and foremost, prices are dictated by the value that people attach to a product. If Americans value, say, TV more, than economics would predict that Americans would therefore pay more for it.
And I think that the examples of telephone prices are cherry-picked based on structural differences, or just plain wrong. Communications rates have plummeted since then. I remember back in '84 people would say, "you've got a long-distance call from Xyz". Today, nobody cares if it's long distance.
In the late '80s, when my wife immigrated from China, she could only afford to talk to her parents every month or so, because the international phone rates cost several dollars per minute. Today she talks to her dad -- with video! -- on a whim, because it's free. And the price of telephone-quality audio is negligible (~$0.02/minute).
Prices are only partially dictated by the value that people attach to a product. In a competitive market, prices are dictated heavily be the inherent underlying cost. When a lot of businesses compete with each other, prices get driven down regardless of how much people valeu the stuff, until they hit a point where they can't go down any further.
The real problem with US telecommunications is that the market is not really competitive. We have four national cell carriers who appear to be pretty big on collusion, and most places only have one or two options for high-speed home internet access.
In a competitive market, prices are dictated heavily be the inherent underlying cost.
This is false. The relationship between cost and price is weak.
At the expensive end, prestige brands push prices of goods to the stratosphere (think women's handbags).
At the cheap end, it's still quite common for prices to decline below cost. For example, consider cell phones or video game consoles, and of course the old standby example, razors. Each of these products is sold below production costs, but by using lock-in, the vendor can recover the loss through sales of proprietary goods later (monthly fees; licenses in game sales; razor blades, respectively).
Cell phones are not sold below cost. You can only get them at a "below cost" price when buying them with a contract which is typically worth $1500+. It's simply deferred payment, not selling below cost. The key here is that paying the additional money later on is not optional. They will charge you fees, hit your credit, send debt collectors after you, and could potentially sue you if you don't pay.
It's true for video game consoles, occasionally, but the consoles are not very useful without games, which they make plenty of money on. The overall average price paid by customers over the lifetime of their purchases is correlated fairly well with the cost of making the stuff. The same goes for razors, printers, and whatever else you care to find that follows this model.
In any case, these are the exception, not the rule. The price of things I normally buy, like food, clothes, gasoline, electricity, and yes, electronics, are strongly based on their costs.
Prestige brands can be sold well above cost precisely because luxury brands become less competitive. Cheap handbags are basically fungible, but luxury ones aren't. When people want an LuxuryCo handbag, they want that, not an equivalent knockoff brand.
When it comes to telecommunications, you can see this happen in competitive markets like hosting providers. The price you pay for a server is pretty strongly linked to the cost of running that server. Dialup ISPs followed the same curve, ultimately ending up with service that was basically free (often ad-supported) because it cost so little to provide, because dialup was a competitive market. Home broadband generally isn't in the US, resulting in prices which can substantially exceed the costs of running the service. In places with more competition, prices more closely match the costs.
To quote the All-Knowing Wikipedia:
"In perfect competition, any profit-maximizing producer faces a market price equal to its marginal cost (P=MC). This implies that a factor's price equals the factor's marginal revenue product."
Of course, you never get perfect competition in the real world, but that's just my point: to the extent that prices don't match costs, it's because competition isn't perfect. The less competitive a market, the less the correlation between prices and costs.
I agree completely about luxury/prestige brands. Your real argument here is about commodities, and designer stuff is intended to not be a commodity. But regarding those commodities...
(please interpret these questions as being investigative rather than argumentative; I see something compelling in your argument, but I'm not sure I completely buy it. I want to understand better)
I understand what you're saying about a market in which consumers would be willing to pay more. The higher prices are a flag waving, showing profit opportunity to other potential competitors. Those others will enter the market and force down prices until the profit margin to be had reaches a level lower than they'd be able to get if they invested their resources into a different market.
But I've got a vague thought in my mind that I can't quite work through, having to do with demand level (as opposed to actual quantity demanded). It seems to me that if the amount that consumers would like is huge, then the degree to which demand pulls on the equilibrium is much greater. Ordinarily, a supplier's production limit is how much they can get the consumers to purchase. But if demand is so great that consumers will buy everything that can be produced (due to input resource constraints, or long lead times in building production capacity or something), then producers can continue to sell at prices that are high relative to production costs.
Where's the hole in that logic? I see the potential for one in my caveat about input resource constraints: if there's a high-profit item whose production and sales are bounded only by resource availability, then presumably the producer will attempt to buy more of that resource, thereby raising its price. Thus, the underlying cost of production would rise to meet the price (rather than the price declining to meet the cost, as previously argued).
But what about the other barriers to entry, such as the time necessary to build a factory? The fact that a new factory must be built does not mean that the market's not free.
> But I've got a vague thought in my mind that I can't quite work through, having to do with demand level (as opposed to actual quantity demanded). It seems to me that if the amount that consumers would like is huge, then the degree to which demand pulls on the equilibrium is much greater. Ordinarily, a supplier's production limit is how much they can get the consumers to purchase. But if demand is so great that consumers will buy everything that can be produced (due to input resource constraints, or long lead times in building production capacity or something), then producers can continue to sell at prices that are high relative to production costs.
Markets are very very rarely perfect. Everything you have described above is a barrier to entry in the given market: it will make the market take longer to reach equilibrium, if the market ever reaches a natural equilibrium at all. Keep in mind though over time supply becomes elastic - if you're making a killing selling deodorant, you can bet that competitors will take notice and open up their own deodorant factories. Or you can expand your own production and make more profit.
> Where's the hole in that logic? I see the potential for one in my caveat about input resource constraints: if there's a high-profit item whose production and sales are bounded only by resource availability, then presumably the producer will attempt to buy more of that resource, thereby raising its price. Thus, the underlying cost of production would rise to meet the price (rather than the price declining to meet the cost, as previously argued).
"Resource availability" is a tricky thing. Generally as a resource becomes more valuable, more opportunities open up to produce it. See oil drilling: at first, the oil was under the ground in so much pressure that it would gush to the surface. People in Spindletop TX gathered oil by putting out buckets in the early days. Now we have to do seismic surveys use complex drilling techniques to get oil. What makes those techniques profitable? The current high price that oil commands.
This is why supply and demand are modeled as linear relationships. Cost of production generally increases per unit as more units are sold and the producer starts running out of ways to produce. Demand generally decreases as something becomes more expensive per unit.
However, both are more flexible (elastic) in the long run. Let's say you produce widgets and there's a sudden surge in demand. You can't expand your stock overnight. But you can open a new factory in a year increasing your supply. On the other side, if you are a consumer and gas prices double tomorrow, there's not much you can do immediately besides fill up your tank. But six months from now, you might set up a carpool or start biking to work.
All of the examples you give were studied in my microecon class (take a look at supply elasticity, which sounds like what you're describing here). If you'd like to learn more (and are in the position to do so) I'd highly recommend taking such a class.
I want to add that capital investments required to enter a market aren't usually an absolute requirement to produce the item at all, but just a requirement to be able to do so at a competitive price. You can almost always throw money at the problem and increase production, even if just marginally. For example, iPhone production is probably completely maxed out right now, but if for some reason it was worth a billion dollars to Apple to produce one unit beyond their current capacity, they could come up with a way to build an extra one that didn't involve spending months building a new factory first.
"In a competitive market, prices are dictated heavily be the inherent underlying cost."
"This is false. The relationship between cost and price is weak."
Actually, this is true and is a well-documented and understood microeconomic concept. The more competitive a market (i.e. more firms, lower barriers to entry etc.) the more cost will dictate price. In this particular example, the market is not perfectly competitive, but the firms competing, (Verizon, Etc.) are not making significant profit margins.
If Americans value, say, TV more, than economics would predict that Americans would therefore pay more for it
And in a free market, the price signal that creates would incentivize other suppliers to start offering more, which would push the price down until it was roughly equal to the French rate. Why doesn't that step happen?
That's sorta true, but it's overly simplified. You're not considering price elasticity.
It would seem that the French are more sensitive to price changes than Americans. That is, as price increases in France, it's hitting a sharper decline in quantity demanded than would be observed in the American market.
I don't know what the actual numbers here are, just that this is micro-economic theory as I understand it.
But in any case, I disbelieve (at least in part) that telephone rates (I don't know about other services) are higher in the USA. I base this on my experience of having just bought two years of domestic service for well under $10/month, and with international calls being cheap to the point of negligible. Moreover, with skype and other services being free, the bottom falls out of any comparison.
Phone communication has been a broken industry for a decade. We have been fully capable of making the whole thing voip using network lines if we had non-crap internet in the first place. If like the topic said, we had fiber to the home, we would have a single internet bill plus some service to provide "rentals" like netflix for shows and movies and that is it. The false split 3 way package deals are already a broken market because they assume you can't get it all under just one of those.
The reason the French rates are so low is because they have competition. I couldn't start an ISP in my area if I wanted to because Verizon owns the phone lines and Comcast owns the cable lines. I would need to lay everything by hand, but even that I would consider not being much of a problem anymore - if you took every "town" of 3k+ in the country you could easily have local ISPs lay fiber channels and fiber to the home for everyone in each community and pay it off with $60 a month service considering the per foot cost of fiber cable is lower than the going rate of coaxial was back in the 70s when cable tv took off.
It is purely a fixed game. You can't introduce competition to the system so you can't make a prediction on the reactionary effects of American consumers because that isn't happening in the first place.
On the topic of phone rates, I paid $250 for a 2 year 5000 minutes prepaid tracfone. It is the best cellular rate I could get considering I infrequently call anyone via traditional means and not over some VOIP service.
Free Markets don't work like that. If you charge 100$ for a bottle of water and most people charge 2$ than you end up selling far fewer bottles of water. Only the fact that we don't have a free market for high speed internet has kept prices so high and service so low.
A "free market" concept in it's pure-bred form does not and cannot exist. You either have some form of government control, or you get a monopoly/duopoly/plutocracy situation that skews things around. This is exactly what's happening now with telcos in the US.
Time to crack the whip and restore sanity in these markets. The telcos have become a law unto themselves.
If you get monopolies, they are considered bad only when they become an obstruction to improvement and inventiveness, because if the prices ever rose enough to justify competition again someone could enter the market, assuming it was a market like on-line retail where you can't crowd out competitors from store shelves.
Internet is a terrible commodity, because so much of the cost of connectivity is wrapped up in laying lines and buying server farms than actually maintaining the infrastructure. And that is really what it is - there is a reason roads aren't private, and why no other animal ever evolved wheels. Some things are best done collectively, and I usually lean libertarian but infrastructure is something you can't effectively leave open to free markets or give to private monopolies, because they are so easy to take through monopolistic practices.
It's a question of barriers to entry. Restaurants have not formed a monopoly in any country in the last 1,000+ years. However, places like Disneyland or the Pentagon will often prevent open markets and create a small internal Monopoly on food.
As to cable and high speed internet / cable. Most locations prohibit completion, artificially limiting which company's can sell cable in a given area. They had a rather tough fight getting off the ground even for an incumbent like Verizon.
I agree. Perhaps the "free market" effect is considerably weaker here perhaps due to the popularity of subsidized phone plans which lock in consumers and hide the real costs. To make matters worse, wireless service cannot be compared with price per mb alone, as there is also a bandwidth quality/coverage factor to look at.
It is weaker for plainer reasons, in that the costs associated with phone, tv, and internet are lay cable once and then reap profits. The costs of maintaining the router farms and fiber lines are paltry compared to the costs of buying the servers and laying the fiber in the first place.
That is why the cartel of providers is as bad as it is in the US - most localities sold their phone and cable lines to private businesses so they never had to recoup the costs of laying lines, and thus no one can compete with them because they had an unfair advantage from the get-go, and they have their hands in the pockets of every local and state government to keep anyone else from even getting permits to try putting down fiber. Sonic and Google are two rare exceptions to that rule.
As others have said, this article was remarkably sensationalist and cherry picked many of their facts.
However there is a grain of truth in here - while Europe had MUCH higher internet / phone / cable costs 10 years ago, from what I've learned from my friends over there the price has dropped dramatically. While 'regular' plans are comparable to US plans, the budget operators are incredibly cheap.
It's been a similar situation in Australia. We had incredibly high costs, and for many years the value of our internet went BACKWARDS - as the price went up, our data was also heavily restricted. However that trend finally reversed and it's much better value now. When I left Australia I had a 200gb 100mbit internet plan with a home line for $78 a month (and that included a cable modem).
I have to say I was pretty shocked at how poor the choice and value is in the US after moving here, particularly in Silicon Valley. Fast internet (> 30mbit) is incredibly unaffordable, and there is huge pressure to have to bundle with cable TV (which I don't want or need).
And what's up with the phone plans here?! The only reason I'm not absolutely screaming about it is I'm on a shared plan with my wife - if I were trying to get a phone just for myself the costs would be insane.
The biggest kicker is trying to find a good prepaid with data SIM - in Australia you can walk into any 7-11 and buy a SIM card for $2 and then get on a $2/day unlimited phone/data prepaid plan (i.e. you just charge up and then every day you use it another $2 is taken off your tab). There is NOTHING like that here.
I'm not sure if it's because of a lack of competition or what - in Australia all networks are now (roughly) compatible with each other, so if you buy a phone on one network it'll work on another. Then you have many many resellers who buy the network access wholesale from the big providers and then resell it. Same for the internet market. That's the only thing I can think of - the US needs to get this happening ASAP.
One thing that is not mentioned is that in some European countries (like in France where I live), there is no limit to the amount of data transfer you can use in a month -- that is, on the home optic fiber lines, not on the mobile ones.
I have a $30 100Mbps plan, and if I want to download 10 TB in a month, there is no additional charge for that.
Mobile plans cost around $20-25 and are tipically capped at 3GB per month.
But don't worry, we're still complaining very much, that the lines are too slow and expensive.
Unlimited plans for Internet over wire is the norm in most European countries. The only exception I know of is the UK. And at least in Sweden it has been like this since broadband was introduced.
I'm on FTTC in the UK (BT Infinity) and on the £26 a month plan it's unlimited (as in, really unlimited). They do throttle BitTorrent though, but that's no great loss for me.
> The biggest kicker is trying to find a good prepaid with data SIM - in Australia you can walk into any 7-11 and buy a SIM card for $2 and then get on a $2/day unlimited phone/data prepaid plan (i.e. you just charge up and then every day you use it another $2 is taken off your tab). There is NOTHING like that here.
Actually I'm currently using a $45/mo unlimited phone and data plan in the US. Google Straight Talk. The only catch is apparently they get mad at you if you go over ~2 gb/mo.
> The only catch is apparently they get mad at you if you go over ~2 gb/mo.
So, what you're saying is that you have a $45 unlimited phone with 2 GB/month data?
Nearly all phone carriers in the US offer 'unlimited' plans which really boil down to hard- or soft-caps between 3-5 GB/month. It's terrible false advertising.
As Bulgaria came into discussion, let me give you a short glimpse at what the biggest cable company in Romania (4th rank in Akamai average peak connection speed 2012) has to offer. For about 25 USD you will get: - 100Mbps Internet access fiber optic, - +100 TV channels including HBO, HBOGo, - one 3G data SIM with 3GB/month, - access to various WIFI hotspots around the country, - 1 phone landline with various free minutes.
All this infrastructure for this network was build in the past 15 years and it is national. Romania is as big as Oregon State.
In my opinion the prices in US for triple-play are as the article states very very high.
It makes sense to compare US prices with western/northern Europe, as they are similarly rich/developed.
But to compare prices in the USA with those in eastern Europe doesn't seem right. In nominal terms, the GDP per capita of the USA is 6 times that of Romania, and 4 times by purchasing power parity.
I've been horrified by my experience after moving to NYC. I have been unable to find any providers that offer upstream of > 5 Mbps, and my current provider, time warner, supplies a locked down cable modem that doesn't allow me to port forward anything. Apparently I can trick it into giving me access to a control panel by resetting it with the cable unplugged, but I've been unable to access the internet after trying to put the damned thing into bridge mode.
I would pay double or triple what I used to pay verizon for 25/25 symmetrical service before moving to NYC. Does anyone know of a provider that can offer something like this for less than $150/mo in NYC??? I'm considering getting a VPS just to tunnel to so I can access my home services at a steady domain...
A possibly cheaper option would be to get an unlocked cable modem that is compatible with their service.
In my area anyways, I can go to my TWC "PayXPress" portal (e.g: your online billing control panel) and on their support page they list links for compatible hardware.
Another suggestion: instead of bridge mode, look for an option called "RG Passthrough" or "Gateway Passthrough" or even just "RG enable"... then get your own router and wire the router's WAN port to the 1st ethernet port on your cable modem.
My motorola surfboard SBG-6850 has this option; and it works while bridge mode fails. I only use it because they want $5/mo to enable wireless on my cable modem. That's right, they want $5/mo to enable some hardware I already have.
I remember a time when MODEMs were just that and nothing else. I would be miserable if my ISP forced a router and wireless access point on me. Cheap routers that have to be reset once a week shouldn't be forced on anyone.
My $50 Linksys WRT54GL goes years between resets and then it is only because I am moving.
im in the same fucked up situation as you in NYC with time warner. there's other isp's on my block and rcn said they would wire the building for free, but clarke mgmt sucks balls and said no. were you able to find a modem that worked on their networks?
The saddest part about this, for us in Canada, is that when we see any American advertised cell phone or internet deals our natural response is "Damn, those Americans got it good over there." I pay around 90 a month for 200 minutes and 4gb of data with unlimited texting under Rogers. Canadian plans are a joke. Seeing this article with a $38.00 plan for phone, internet, and TV is just completely unfathomable for me. :P
Mobilicity and/or Wind Mobile not available in your city? $45 a month for "unlimited" data, NA voice and global text.
Of course in a few years the big three will purchase them ala Fido and PCS and it will back to the status quo, but in the meantime I am enjoying sane cell phone rates.
I think this actually has something to do with why we pay so much for this kind of service in Canada. Our population is so thinly spread (other than a few major cities, who do have these cheap alternatives) that I bet if they even tried to cover second tier cities, they'd lose money. European countries have the advantage of being really small.
According to Wikipedia,Sweden has 20.6 people per square kilometer,compared to 3.4 in Canada. Also,Canada is slightly larger. Much easier to cover all (or most) of Sweden than Canada
Here's another stat to look at. Southern Ontario, roughly up to Algonquin Park, has around 12 million people on about 140,000 km^2. Sweden has around 9.5 million people on about 450,000 km^2. Going purely by area or density criteria, southern Ontario should have telecom service miles ahead of Sweden, even in towns that are tiny and remote by southern Ontario standards.
Sure, but you don't live in the middle of the Northwest Territories, and neither do the vast majority of Canadians complaining about telecom prices. The population density figure is a bit of a red herring.
I am very astonished by the comments I read here. That internet is way cheaper and faster in Europe and Japan than it is in the US is a fact, period. And it is not because the governments pay for it. It is because the market competition works there, not here! America is not always where capitalism is best implemented! Antitrusts law should step in and these companies must compete!
The article doesn't really answer why the services cost so much. The higher fees aren't going to the margins of the telecoms. Verizon has a revenues of $39.14 per share and earnings of $2.31 per share for the past year.
I show $2.89 in earnings for CY2011 and $2.00 in dividends paid for a total of $4.89 on $38.57 in revenue per share, dividends + earnings = 12.6% revenue. That is very high for a mature company in a competitive market. I'll use WalMart as an example -- $132.91 revenue per share, $1.53 in dividends, and $4.74 in EPS for 4.7% of revenue.
Dividends are paid out of earnings so adding dividends to earnings is not an accurate way to understand a company's finances.
Revenues last year were $110,875.
Earnings (profit after expenses including depreciation): $2,404
Profit margin was 2.16% for 2011.
Walmart did about 3.5% for 2011.
Aleyan has a very valid question which is much more interesting than the original story. I would love to hear some people's opinions on why it is so expensive to provide highspeed internet.
12% is high but, if I recall correctly, French telcos are way above that. Some news report from a year ago claimed something about 30%, but I don't remember if it was average or one of the trio. This was about the time the trio lost the fight to prevent government from allowing a fourth competitor to enter the market.
"The article doesn't really answer why the services cost so much."
The video ends with the author explaining that it is due to a cartel of 5 or 6 companies getting together to fix prices with "non-compete" agreements. Where is the government? In bed with them. There is your answer.
Doesn't explain then what the telecoms are doing with their alleged ill begotten gains. Burning benjamins in their furnaces? They are certainly not making out-sized returns for the shareholders.
The infrastructure in those other countries is considerably less expensive to set up. The US is HUGE. For a company to have nationwide coverage they need to invest a TON in infrastructure. It's not surprising to me that our services are so much more expensive than the rest of the world.
I didn't realize the difference was as big as it was though. It's surprising because even though internet/tv is sort of expensive here, it isn't at all cost prohibitive for the majority of Americans.
I would agree with this except for the fact most people don't even talk about nationwide with this issue. You can look at any major metropolitan area in the US where a great deal of infrastructure is already built and the options vs price is dismal as compared to the rest of the world. Also, as the article points out, the telcos were given subsidies for years to build this infrastructure of which they did little outside of big cities. Building cool stuff in big cities is highly visible and good PR, doing it in small town USA is not quite as PR worthy.
Never mind the fact that we have seen several examples of big cable doing everything they can to prevent new infrastructure from being built because they would have to compete with it. Adding insult to injury is that many times this is against small towns that big cable has written off as not worth the investment in the first place. Thankfully I think we're finally seeing a shift against this kind of thing.
But even then there are still complaints over the pricing part. If an area doesn't have the infrastructure then that's fine, charge a proper fee for what they do have access to. I'm sure there are plenty of examples of people paying $30 for 10Mb service while an hour down the road people are paying $30 for 2Mb service.
This is just internet though, pricing structure over cable TV is seriously screwed up but not just because of cable companies. The companies that create the content have a big hand in that fiasco as well.
The size isn't really the fundamental problem. High density areas in the US are also poorly served. My thought is that the root problem is that free markets for the service in the US aren't efficient because the players are too big and too few. Neither has the FCC regulated the market to a structure that would bring out competitive activity.
Europe has more regulation to ensure portability across markets, as well as smaller regions, fundamentally divided by national boundaries. This sizing leads to smaller required capital investments, allowing more competitors and less customer lock in. Collectively this results in a more competitive market.
Vs. the US where the cost of spectrum auctions alone lock-out everyone but the largest x companies. With few other competitors, it's logical for the companies to rely on open pricing signals to avoid competition on price.
So many countries that are far LESS densely populated than the US - and MORE densely populated - have much cheaper Internet. It does not seem to be the deciding factor.
That's a problem if you're living in Wyoming but for the majority of the US population, low population density is not a factor. There are vast mostly empty areas in the US, but people congregate in highly dense cities and suburbs.
Take California, it's 93.3 /km^2, New York State is 159.2 /km^2, New Jersey is 459 /km^2, and DC is 3,886 /km^2.
But taking out non-cities for example, why are the prices in say New York, which definitely has the population density to support advanced high speed links so high and the connections as abysmal?
It comes down to the local bureaucratic hurdles and initiatives. I really support the idea that fibre/internet links should be a utility and not a resource controlled by a single entity. Look at comcast as an example, they are ONLY auto-upgrading plans in FIOS service areas. How this isn't looked at as a severe lack of competition or fundamental problem with our oversight of them I can't entirely fathom.
RCN offers 75 Mbps for $90/month. Telia in Sweden offers (in limited markets) 250Mbps fiber for $75/month and 100 Mbps symmetric (more generally) for $60/month. That is, in a city of 50,000 people in Sweden I can get 100/100 Mbps up and down for cheaper than you can in NYC for only 75/10.
So while you can get better connectivity in the city than in the suburbs, the question you should ask is why NYC is worse than many Swedish cities or, say, Singapore, where 100 Mbps is about $50/month.
That might explain high costs for some users (or subsidies, which I believe we have for rural access). It doesn't explain why these costs would be high in urban areas.
My ATT plan doesn't cost any different based on where I live. I guess my comcast plan might, but as far as I can tell, I saw the same deals when I lived in Michigan as I do now in Washington.
> The US is HUGE. For a company to have nationwide coverage
> they need to invest a TON in infrastructure.
Canada is bigger and we've had several new entrants to mobile phone business who've set up their own networks to cover the largest cities in Canada. I think the key is that they're not covering everything (they roam on other networks). Wind Mobile (my provider) regularly offers $40/mo for unlimited nationwide talk/text and 5GB/mo (throttled after the cap an no overage charge). Mobilicity has something similar, but with a $22.50 promo price.
The catch is that "unlimited" means within the parts of their network: regions around the major cities in Canada.
Another company could come along and do a similar scale rollout along the east or west US coasts. I think the difference is that these new operators got to buy up some spectrum back in 2008 because Industry Canada set aside 40 MHz of AWS spectrum for new entrants in an effort to bring more wireless competition to Canada (back then, our three monopoly operators had 94% of the market) [ http://www.dwpv.com/en/Resources/Publications/2009/Flash-Dec... ]. I recall Google bidding on some US spectrum back in 2008. Did anything ever come of that? Did anyone aside from the big networks get any spectrum?
Edit: You might also be talking about home internet. I have 25 Mbps for $33/mo (it can actually go up to 300 Mbps for $103/mo). Unlike in mobile, my provider Novus is (I believe) reselling service from one of the big networks. (The only other one I know by name is TekSavvy, but I believe there's several of them in different parts of Canada.) I'm not sure if there are similar resellers in the US. Our resellers had some legal battles to allow them to offer this service [ http://en.wikipedia.org/wiki/Usage_Based_Billing_(UBB)#Usage... ], so maybe the legal requirements on the network holders is also a contributing factor for increased US prices.
That's a reasonable excuse for nationwide mobile services. I don't think it explains why the infrastructure cost would be very different for cable and internet in major US cities.
That does not explain why Sweden and Finland have way better coverage while having lower population density. The total area should not matter, only the population density.
The US has a lot of suburban sprawl, so population densities are lower in the places where people actually live. (Still I don't believe this is the real reason.)
True, that could explain why Internet over fiber is less common, but does not explain the poor and expensive cell phone coverage. We have good coverage in most of Sweden, even where virtually nobody lives.
Skipping having 3-4 incompatible networks probably helped a lot (I'm not familiar with the details, but I think at one point the U.S. had Analog, GSM, CDMA and iDEN networks in widespread use).
Greater regulatory uniformity also probably helps a lot.
And then there are things like the New York metropolitan area having 3 times the population of Sweden, while many other states are many times the size of Sweden (so a U.S. national carrier needs to specialize in both serving much higher and much lower density than a Swedish national carrier).
I'm not insisting that the wildly varying density makes the actual provision of service particularly harder, but combine it with many different regulators and no strong overall regulator and it isn't surprising things are a mess.
Also the 1990s 'PCS' auction which created hundreds of teeny-tiny local cellular companies. It took a long time for the big providers to stitch a nationwide network together.
Personally I believe the size has little to do with it. The other factors you mentioned are way more important. The regulation has been handled terribly in the US.
That is why the government gave telcos billions every year to subsidize fiber to the home roll-outs. The telcos laughed out loud while pocketing the money and transferring into overseas assets. For their terrible actions, the gov would give them more money in order to be laughed at again.
The most expensive part is the "last mile" or hooking individual buildings up to the grid. What I propose is that the Federal government build fiber to each and every public school and university.
From there, leave it up to the individual state, county, and city governments to see if they want to front the real cost, which is the last mile.
You could even make it like the New Deal and only hire chronic unemployed workers (unemployed >6 months) and train them to lay the fiber. These newly trained workers can then be hired by the local governments who choose to complete the last mile from the national backbone.
It would at least give the unemployed work, the schools access to information, and let the rest of us to decide whether or not to pay the real cost.
Anecdotally that is why my small town of <10,000 has two small businesses that offer 100mbps fiber in town and wireless (at ~DSL speeds) out of town.
In the '90s, Iowa put down* fiber that runs right through our town, and these companies were able to tap in and offer it, first to businesses and in a central area, and then later to any homeowner that wants it, thanks to a grant to offset the cost of installation (but only if they offered service to the entire town, probably less than 20 square miles). I pay $70/mo including a local phone number and the money stays local.
This. Please repeat your story - from the media it would sound like Verizon FiOS and Google Fiber are the only players - when obviously there are lots of companies making fiber plays right now.
Then fewer people would believe these articles about "why you will never get fiber" - arguably that's false, since it is only necessary to move to a city that has it.
If the '49ers moved to California for gold, it's not so far-fetched to have a mass migration away from these backwards, oppressive places that still only have high prices for slow speeds.
Nearly 100 years ago the citizens of my rural locality built a co-operative telephone company. The organization still remains owned by the customers and, as such, have to act to the interests of those customers.
The result is that the entire service area – which consists of mostly farms, and some small town areas – have had DSL connections for more than a decade and they have been working to roll out fibre to those locations for the past few years.
If the citizens are going to pool their money to build infrastructure anyway, what advantage does the government model bring over the co-operative model?
In a rural area with a strong sense of community, a non-governmental cooperative can work pretty easily. In an area with more fighting and less community, you need government power of eminent domain to acquire the rights to intrude on people's land for infrastructural purposes.
Given the battles that are heating up over wind turbines, I'm not sure rural areas have any more sense of community than anywhere else. Though perhaps things were different a century ago.
The main problem seems to be the lack of competition due to restricted infrastructure. In a lot of areas in the US, you only have one company that provides service to the area you live in. In a situation like that, the provider has little motivation to improve the service. This needs to be recognized as monopolistic and the infrastructure needs to be opened up so that it can be used by other providers.
Luckily, there is some decent competition in the wireless internet space. As technology continues to improve there, more people will have access to decent internet speeds wirelessly and the wired infrastructure will feel pressure to catch up. Hopefully more options for unlimited data plans will also become available in the near future.
As far as the absurd amount TV providers are charging for HD TV, DVR services and the like. Technologies like Netflix, Hulu, Apple and others are providing more internet-based services that provide this type of On-demand service at a much more reasonable price. I hope more content will become available on these types of services as more people realize how much better of a user experience it is over watching normal network TV (even with DVR).
Yeah, I think more and better competition is the answer but I'm not sure what the best way is to get there. More regulation? Less? We do, for the most part, have pretty good baseline infrastructure in the US. The infrastructure part of the problem is the 'last mile' piece, but in my mind this is something that can be easily accomplished by new, locally based entities. I think that municipally owned broadband is a really interesting option - GreenLight in Wilson, NC has had some good success: http://www.wilsonnc.org/living/fiberopticnetwork/greenlighth... - but they have had to fight off lobbying efforts by TimeWarner Cable and others to make such municipally owned efforts illegal, and the legality of such services is still on a State by State basis.
So - I guess another question might be, how do we make Community owned broadband an attractive option across the country?
I sadly feel the only way it can be fixed is via government solution. But it has be done on the federal level because a great deal of the issues we have with the current system is due to government on the local level. The system as it is in place right now is highly favorable to the providers which was rubber stamped by local governments in many places.
The US is a big country but it's not the problem of sprawl/distance/density or any of that stuff. The problem is that the US is essentially made up of fifty states that each have their own laws and regulations. Even then these states are broken up into counties (or equivalents) that may also have their own laws and regulations. Now toss in there the different deals and contracts that the different companies have with each of these entities. There's a reason why one neighborhood only has provider A while the next neighborhood down only has provider B.
Granted, there are things like this on the federal level too.
At some point it'll probably take an act of Congress to get the courage to say that the current system is not acceptable and detrimental to the country's future. What will probably have to be done is some kind of mass movement to convert the system to some form of municipal-based service similar to electricity and water in most areas. But even that system doesn't work out well for everybody.
I am sorry but the sole problem here is that the US administration has bought the cable and phone companies line that mergers are necessary and that they need to increase the bills to lay more fiber. In the same time in Europe we had massive government mandated unbundling of the last mile so all the companies actually layed fiber because service quality was the main differentiator. I mean who wants to compete on price in a competitive market.
I'm not saying that I think the government should step in, it's just that it feels that's likely outcome at this point. What you say would be the more agreeable solution to me. It's just that I don't see it happening unless there's a major change in how the government behaves in terms of big business in the US.
Sadly, I don't think "how do we fix it?" ever gets the responses it deserves at HN. I imagine it's because anyone with solutions is applying to YC with them. Still, I (and many others who have written blogs along the lines) would love to see HN comments sections filled with more solutions and constructive criticisms and less put downs or complaints for the sake of complaining. Now the question is, how do we fix that?
simplest answer: the 1996 Telecom Deregulation Act.
Sold as a way to bring real competition after the breakup of ATT, what it did instead was: 1) coax Baby Boomer money into the stock market, causing the Telecom boom, with all the mis-investing that a boom entails, 2) build a lot of infrastructure with the new money, that the incumbent companies didn't have the stomach for, 3) free up the baby Bells from much regulation, but not enforce the "play fair" rules to allow upstarts to use the extant infrastructure, and 4) crash the boom, allowing the incumbents to pick up intrastructure for cents on the dollar. Instead of a rebirth following the crash, as is usual, in which the newcomers get to pick through the remains of the last boom, the remants mostly got gobbled up by the incumbents (even ATT, absorbed by SBC). So the landscape looks much like it did originally, except now the old incumbents control the Internet, instead of just the phone system. Innovation is largely coming on top of the Internet, instead of in providing it.
Hosting on this continent is pretty much a ripoff as well.. one can reasonably assume something is terribly wrong if pricing is broken up to that level.
Anecdote alert: I recently moved from a stateside provider to one in Germany. A dedicated server, quad core, 8 gigs, 1TB transfer out was running me around $120 a month from my usual provider.
The German host has me set up on the same CPU, but with 32 gigs and 10TB transfer out for less than $80.
400% more memory and 1000% more bandwidth for a $40/mo reduction in cost. The pricing on stateside dedicated servers wasn't out of the ordinary either. If anything, I've seen virtual servers be on the same level, with dedicated servers even more absurd.
Because we as a nation are willfully delusional as to how corrupt our government and corporations are. How much buying regulation and legislation is standard part of business.
It is expensive in the US compared to the other two countries I get sims for, the UK and Australia.
In the UK I can get a sim and monthly plan for my iPhone for around £6, which gives me what I need. In Australia it's about $30 for a month. In the US it was either H2O at $50 a month or StraightTalk from Walmart for $45. I recently moved my girlfriends grandfathered AT&T iPhone plan on to StraightTalk for a saving of about $50 pm. A 2 gig limit on data compared to her grandfathered unlimited, but thats OK.
It all comes down to greed and gouging. Period. There's too much money being made to stop it now. I'm all for capitalism and making money by working hard, but this is the opposite of that. Inferior product, astronomical rates. These are industries strangleheld by a few gigantic companies, and that, my friends, is bad for everyone.
I came from a developing country and among the things I miss about it is low cost phone, cable and internet. Basically $25/month vs $150 I'm paying now for pretty similar quality of service. That has puzzled me a great deal, shouldn't tech cost be much higher in a developing country than in the #1 technology country in the world.
The USA is very sparsely populated compared to South Korea, Japan, or most of Europe. The Ukraine (mentioned in the video), is a really big chunk of land with a smaller population than the UK, but still appears to have more than twice the population density of the USA (eyeballing wikipedia numbers). This is obviously a big deal for any infrastructure project.
I'm not saying this is the whole (or even the main part) of the explanation, but it needs to be taken into account at least. In my opinion it certainly wouldn't excuse poor service in towns with 100k+ people.
When it comes down to it, internet access is crucial now, and it does enable other parts of the economy to flourish. If the government needs to step in to give it a push, it seems worth it in this case? After all, what is a government for if not planning for the long-term when individuals and corporations can't?
I lived in Hong Kong for about 18 months temporarily as an expat from the US. I was astonished that for about 300 HKD (< 40 USD), I could get unlimited data and a new iphone with contract. The only catch: contracts are usually 18 months or longer. But even then, it is dirt cheap compared to US.
OK so assuming Americans do end up paying way more for less in the phone, cable, and internet departments, what's the solution?
I can't recall one month when my parents, both highly educated and cautious, aren't griping about some "strange" or "unknown" charge creeping up into their phone bill. They've even tried different plans on different networks over the years to find the most economical package for the family. When I ask them which network they like the best, they always reply with, "it's not about which network is the best, but about which one sucks the least."
And internet? I'm tired of hearing how overseas ISPs are just better (speed to cost ratio) than the ones here. I guess I'm just crossing my fingers waiting to see what happens with Google Fiber, but I seriously hate putting all my eggs in one basket.
In Seattle we have a startup called Spectrum Networks which offers 100mbps fiber and microwave internet to a small set of condos and apartments. Last I checked, it was a 9 person operation. I don't see why more startups like this haven't cropped up in other towns.
Local government doesn't allow competition against the big company they have some form of agreement with.
Big company buys them out to shut them down so they don't have to compete with it.
Big company crushes them via pricing reduction (until competition is gone so it goes back up), sicks the lawyers on them (doesn't matter if valid or not, defending oneself in court is expensive), or a highly expensive negative PR campaign.
It all depends on the state, county, and/or city. What can work in one area might not be feasible or legal in other areas. It's a huge multi-headed issue in the US.
Disclaimer: I used to work at a wireless ISP and I am going to decorate your comment.
Oddly, local government has no say over it. As long as you can legally place antennas and/or dishes in the right spots, you can do whatever you like. You can run on crappy 2.4GHz or 5GHz radios or use more fancy FCC leased spectrum 30GHz-60GHz radios or even line-of-sight optical lasers. You will typically run a 20Mbps to 1Gbps connection to an apartment/condo complex then feed individual units from there (i.e. each customer isn't getting their own wireless connection unless you are a fancy business paying for that level of service).
Big companies don't care much about tiny ISPs here and there. What's more likely is the biggest of the tiny ISPs will buy you to goose their numbers.
If your tiny ISP is aggressive in servicing buildings, you may see Comcast running counter promotions against your pricing. Welcome to the free market.
I live here in Seattle and would love an alternative to comcast, however, I don't think this is it. I googled them, looked at their website and see nothing about pricing, how to sign up and their links under "Services" on their homepage don't even work.
Well, they have to light up your entire building first. It's no something you can initiate as a single person. You have to get your apartment/condo/mdu management to send them some flirty emails.
I have considered this a lot and the problem appears to be mostly a policy problem boiling down to the two following issues:
* Right of way laws in localities make it difficult to deploy cabling of any sort. Starting a network operator is incredibly difficult legally even if you have the capital. Also, counties often grant monopolies to particular cable companies and do not allow other operators to enter the market.
* It's a popular economic thought (and apparently one the FCC subscribes to) that CLEC/wholesale style systems do not incentivize network infrastructure maintainers to keep pace with technological advancements. As a result the FCC has granted control to vertically integrated operators like ATT/Verizon/Comcast.
There is only one cable and one phone company in my city.
Our prices are terrible and guaranteed to go up each year.
But with cellphone companies, there are usually three or four of them and prices are still bad. So I am not sure why the market doesn't "correct itself".
Most of the "low cost" cell carriers in the US actually lease bandwidth from the larger carriers or are subsidiary of the larger carrier, for example Boost and Virgin Mobile are wholly owned subsidiaries of Sprint.
Point being there's not as many carriers as you think their are.
The problem with a lot of the comments here is that the participants use logic, while typical Americans do not. The main point is really about lack of transparency by providers and complacency by consumers... Compounded by an industry that has gotten into bed with government.
The market will eventually correct as phone, cable, and internet services continue to be individually picked off by best of breed pure plays that create simple service with transparent business models. May take a while, but it will happen.
Not a very good article. He's thrown together a bunch of unrelated statistics and left out some pretty important information, like the total cost in the landline example. I remember paying $1/minute to call someone 50 miles away before ATT was broken up.
The question I have is whether or not wireless carriers pay for spectrum in other countries. Verizon paid over $17B for spectrum, and that money is going to have to come from somewhere.
When I bought my first landline in the mid-2000s the cost was $40 a month for local service. 75% of that charge was local and state fees.
My first phone call was an automated telemarketer. 98% of my calls after that were also telemarketers of one form or anther. Ads started stressing me out, and I ceased being so nice to cold callers.
The landline lasted maybe two months before I figured a cell would be cheaper and less annoying.
And how much per minute was long-distance in 1984? In the early 80s almost all the profit from telephone service was in the long-distance service. For example, 1980: in today's dollars, it was over $1 PER MINUTE to call New York from Los Angeles.
Fun story. The university I went to used to buy long-distance minutes in bulk at 12 cents, sell them at 25 cents, and made a million bucks a year off of students calling home. Now they buy them at 3, sell them at 5, and everyone uses cell phones so there aren't any landlines in the dorms so emergency and "too much ice, class cancelled" notifications and the campus phone directory are a disaster... also, the IT department is out a million bucks a year.
My "triple play" in NC, US was $140, that's with 6Mbps internet (at the time), HD digital cable with no premium channels, and digital phone with unlimited calling in US and Canada.
I "downgraded" to 30Mbit Internet. Added Netflix and Amazon Prime for TV and Vonage for phone, saving $50/mo. in the process. I still feel gypped.
Couple of reasons why it's more expensive here:
1) Area and population density: Countries like Japan have a small area with a very high population density. This drives, infrastructure costs down and the return on it high because you have a lot of users.
2) Minimum wage in the US: The cost of labor in the US is quite high hence it costs more to build out infrastructure than it does in other countries.
People continually try to use density as some sort of an excuse for the ludicrously under-spec broadband deployments in the US.
Why do NYC, SF, Boston, Chicago, and LA all still have the same shitty service as the rest of the country? SF is far more dense than the totality of any European country and only has the same monopolistic, overpriced, underperforming, punitively-capped service as the rest of the US (except for the lucky people who live in the 20 webpass buildings.)
Japan, France, Australia, and Britain (a sampling of countries being discussed) all have minimum wages that are comparable to or in excess of the United States.
I also live in an area that will never see high-speed internet. We were sold out by both the feds and our state legislators. You can argue that perhaps these government officials were misled or uniformed, but I remain dubious.
We were able to construct an interstate highway system. We were able to wire this country with electricity. We were able to wire it for telephones. The only reason we can't wire it with fiber is because of poor government management of eminent domain. We should kick most of those responsible out of office. To see a bunch of yahoos on TV telling me we need the road paved when most of their constituents don't have enough bandwidth to get high-quality instruction over the web? Or to work over the web? It's the Information Age, bozos. Something is wrong somewhere.
The worst part? I do not expect this to get fixed any time in the next couple of decades. Not only is it broken and hurting, but there's no political incentive to fix it. In fact the incentives run the other way.