You Pay Far Too Much For Internet And That’s A Problem

    July 23, 2012

The Internet has become a staple of modern communication. While some people use the Internet to watch funny cat videos on YouTube, it’s importance can not be understated for the millions of global citizens who use it to share important information about their world with others. The Internet can be credited with the success of the Arab Spring and the U.N. even announced the Internet as a basic human right. So why does a basic human right cost so much in the U.S. when other countries get faster Internet for far less?

To understand this question, we have to look at a multitude of factors that range from local monopolies to lack of proper infrastructure. it’s a multi-faceted problem with not a lot of solutions out there. There are some companies, like Google, and cities who are trying to win back the Internet for the people instead of making it the luxury that many ISPs treat it as now.

How much do you pay for Internet? Do you find the prices to be exploitative? Let us know in the comments.

Chances are you live in a city that’s serviced by the one of the big ISPs like Comcast, Time Warner Cable or Verizon. How much do you pay for Internet? According to the White Fence Index, the average cost of Internet among top U.S. cities is $38 a month. Compare that to a country like South Korea where ADSL premium, which blows our best Internet out of the water, is only 30,000 won ($26) a month.

So why do we pay more for inferior Internet? Well, you could argue that the infrastructure is much larger in the U.S. and therefore requires more money to fund which leads to higher prices. That’s certainly somewhat true, but it also comes down to how much importance is placed on the Internet.

South Korea is such an Internet powerhouse because their government has invested heavily in expanding the Internet and their citizen’s access to it. The U.S. has a similar plan that was created with the American Recovery and Reinvestment Act of 2009 that was passed in response to the global economic crisis that began in 2008. The plan, kickstarted by the FCC, is called the National Broadband Plan. It’s goal is to give every American “robust, affordable Internet.”

So what’s this National Broadband Plan? Here’s the four step process the FCC has in place:

  • Design policies to ensure robust competition and, as a result maximize consumer welfare, innovation and investment.
  • Ensure efficient allocation and management of assets government controls or influences, such as spectrum, poles, and rights-of-way, to encourage network upgrades and competitive entry.
  • Reform current universal service mechanisms to support deployment of broadband and voice in high-cost areas; and ensure that low-income Americans can afford broadband; and in addition, support efforts to boost adoption and utilization.
  • Reform laws, policies, standards and incentives to maximize the benefits of broadband in sectors government influences significantly, such as public education, health care and government operations.
  • If successful, the FCC hopes that this plan will bring the U.S. Internet into the 21st century. Their long term goal is to make sure that at least “100 million homes should have affordable access to actual download speeds of at least 100 megabits per second and actual upload speeds of at least 50 megabits per second.”

    Do you think the FCC’s plan for affordable 100Mbps downstream is feasible? Let us know in the comments.

    My local ISP offers up to 50Mbps downloads speeds for $95 a month. I’m paying $60 for only 30Mbps a month. As you can see, my ISP is not quite there and only a few are. For those who are at those speeds, the cost is quite outrageous. Verizon’s FiOS service ,which puts out speeds from 15Mbps to 300Mbps, costs anywhere between $65 to $210 per month just for Internet. That’s not quite what affordable means. Thankfully, there are efforts on the part from companies like Google and local governments to bring affordable, fast fiber at a low price to consumers.

    We brought you word on Wednesday that Google was about to unveil their new Fiber network in Kansas City. Google Fiber is somewhat of an experiment on Google’s part to see how affordable, yet cheap, Internet can impact innovation and competitiveness in the ISP market.

    Google Fiber will be launching on July 26 and it has ISPs scared. There was the humorous story from last week that saw Time Warner Cable offering rewards to anybody who would spy on Google’s efforts to bring Fiber to the city. Google hasn’t come out and said they want to be an ISP, but people certainly see it that way. The company’s purchase of dark fiber in 2006, while being used to connect data centers, was certainly viewed as Google eyeing the consumer Internet market.

    The experiment in Kansas City might be a failure though. It might convince Google to stay out of the consumer market and stick to providing Internet services. The promise of cheap Internet at faster speeds, however, makes that scenario highly unlikely. In fact, Google is probably onto something here. If the city can afford it, they’re going to start providing cheaper Internet to their citizens as well.

    One such city in Colorado is already on their way. The city of Longmont is now in discussion to start selling Internet to local businesses. It could be extended to over 1,000 homes as well. While some people would deride government intervening and competing with businesses, the citizens of the city don’t seem to mind. In fact, over 57 percent of those at the city council meeting voted to start construction on the fiber network immediately.

    The one thing we must keep in mind is price. Google and Longmont have both stayed away from the issue of price since these plans were announced. They promise that the speeds will be faster and cheaper than the competition, but by how much? It obviously has the ISPs spooked, but we just don’t know how scared they should be.

    In a perfect world, Google will thrown down the gauntlet on July 26. A move that will force Time Warner to lower their prices in Kansas City which will then have a rippling effect across the country as more ISPs lower their prices to deal with the demand from consumers for affordable Internet.

    Unfortunately, we don’t live in a perfect world. It’s going to take more competition from Google and the expansion of fiber to really drive down prices in the U.S. Longmont had to specifically vote down a law that prevented the city from offering Internet to its citizens. Other cities and states have similar laws that would need to be amended before such actions could take place.

    It really all comes down to how people view the Internet in the U.S. The U.N. obviously sees it as a human right, but many people still see it as a luxury. You can argue that one doesn’t need the Internet, but that only hampers progress. We’re only going to start seeing real results once people decide to see the Internet as a commodity instead of a luxury. Google and Longmont are leading the charge to that future.

    Do you think that Google and local cities should become ISPs? Will it drive prices down and speeds up? Let us know in the comments.