Communications - November 2011

ing to the National Broadband Map, approximately 98% of U.S. households have Internet access with speeds at least 768kbps downstream and at least 200kbps upstream, and 96% have access to broadband of at least 3mbps downstream and 768kbps upstream. Nearly everyone without terrestrial access can purchase service from two satellite providers that are both in the process of significantly upgrading their service.

While availability is not a significant problem, a large income-based digital divide remains: poor people adopt broadband at substantially lower rates than wealthier people. Yet, U.S. policy does not focus on changing adoption. It focuses on building out to under-served areas, a less effective way to increase adoption. 2 For example, the $7.1 billion in broadband stimulus grants focused almost exclusively on building infrastructure, and the enabling legislation even barred the program from granting subsidies to individuals rather than firms. Current efforts to reform universal service suggest this focus is unlikely to change much.

Speed. Average advertised download speeds in many OECD countries are generally faster than they are in the U. S. As the accompanying figure indicates, however, the means of advertised plans do not reflect the speeds consumers actually purchase or receive. As it turns out, measured speeds are remarkably similar across rich countries.

Conventional wisdom holds that faster broadband speeds are always better, but is faster more useful? Most consumers do not value very high speeds and do not purchase those speeds even when they are available. It is true that speeds considered acceptable in the early days of DSL are too slow for many of today’s common applications. But even today, speeds faster than approximately 10mbps deliver little incremental value for the simple reason that even the most bandwidth-intensive uses, like streaming high-definition video, require much less. Netflix and Amazon, for example, stream high-definition video at under 5mbps. A broadband connection cannot pull in the video faster than it is being pushed out.

Speed seems to be of so little concern to most U.S. broadband users

conventional
wisdom holds that
faster broadband
speeds are always
better, but is faster
more useful?

since the Bell 103 modem first communicated at a blazing 300bps, and someday we might consider today’s speeds similarly absurdly slow, but no evidence suggests speeds are holding back innovation today. The typical purchased and available speeds in nearly every OECD country already exceed the bandwidth required for commonly used applications.

that 80% of them do not even bother to remember or check their own speed. A recent FCC survey found that 80% of U.S. broadband users did not know the speeds of their home broadband connections, yet 50% of users reported being “very satisfied” and 41% reporting being “somewhat satisfied” with their speed. In a detailed study of residential broadband demand in the U.S., Rosston, Savage, and Waldman1 found that consumers were willing to pay about $80 per month for a reliable, “fast” connection, but were willing to pay only an additional $3 per month for a “very fast” connection.

To be sure, demand for speed will continue to change over time, as it has

What should We measure?

Comparing performance across countries can be valuable, but we should focus on the right things.

Wireless Inputs and Outputs. A few years ago broadband implicitly meant wired connections. Within wired broadband, even as late as 2009 many industry observers thought the future of broadband exclusively meant fiber. Cable’s DOCSIS 3.0 technology improved the capacity of cable broadband to such an extent that some analysts believe hybrid-fiber coaxial connections will allow the cable industry to dominate the wired market in much of the U.S.

Perhaps even that prediction is changing. The iPhone, iPad, Android operating system, and related app stores have made wireless an increasingly important part of the broadband ecosystem. Soaring wireless broad-

measured and advertised download speeds (in kbps).

median speedtest.net measured data mean advertised speed

110,000

100,000 90,000 80,000 70,000 60,000 50,000

south Korea
Japan
sweden
netherlands
Portugal
germany
Finland
Iceland
switzerland
denmark
belgium
France
hungary
austria
Czech republic
slovak republic
nor way
united states
luxembourg
Canada
united Kingdom
greece
Poland
australia
new Zealand
Ireland
spain
turkey
Italy
mexico
kbps