How Do U.S. Internet Costs Compare To The Rest Of The World?

Posted under: Internet

Do you feel like you're paying too much for internet access? Have you ever wondered if prices in the US are extraordinarily high? If you've looked at your bill recently, we suspect you have. With high-speed internet access so important to our daily lives, it seems like ensuring affordable access should be a no-brainer, but the story on the ground suggests it's much more complicated.

To better understand the situation in the United States and determine if higher prices are in line with what's going on in the rest of the world, we've conducted this comparison of internet costs worldwide. We've also analyzed some of the reasons why prices are so different in the United States than in other nations.

Before diving into a full review of the data we've collected, here's a snapshot of what we found:

Internet Costs in the U.S. Compared With The Rest Of The World

The Link Between Price and Access

In today's fast-paced, digital world, having access to a speedy, reliable internet connection is a near requirement for survival. However, according to a study conducted by Microsoft, it's believed some 160 million Americans are without a broadband internet connection, which the Federal Communications Commission (FCC) defines as speeds of 25 Mbps or more.

Interestingly, the FCC reports this number is much smaller - around 25 million - but this is mainly due to the way they count. In an interview with CBS' Sunday Morning, Gigi Sohn, the director of the FCC during the Obama administration, recounted the agency's tactics for counting, "If you can serve one person in a census block, that means you're serving everybody in the census block."

Census blocks often include thousands of people, making this way of counting rather ineffective at measuring true access.

Considering how important an internet connection is, these numbers are alarming. In the same CBS interview, Sohn went on to say, "The vast majority of Americans who don't have broadband internet access &it's because they can't afford it... it's because the price is too high."

Of course, things such as infrastructure expenses also play a role. Connecting rural areas can be difficult, but the reality is that millions of Americans are being left out of the digital world simply because they can't afford a decent internet connection.

This link between price and access is an important one to keep in mind as we take a look at how the cost of internet in the United States compares with other countries.

The Average Cost of Internet in the United States

If you look up the average cost of internet in the United States, you might get some conflicting numbers. For one, many like to only look at the average price of internet plans, and when they do this, they can come up with a number that's around $35-$40.

However, we suspect there are very few people reading this who actually pay just $35 a month for their broadband internet access. This is because plans this cheap usually don't give you enough speed, meaning you need to upgrade (and pay more) for something that will meet your needs. More importantly, internet plans come with all sorts of activation and equipment rental fees, as well as taxes and other government fees, all of which balloon the cost of an internet connection.

As a result, the average cost of a broadband internet connection in the United States is $61.07, according to data collected by the Organisation for Economic Co-operation and Development (OECD).

Now let's take a look at how this price compares with nations around the world.

The United States vs. the OECD

The OECD is a grouping of 33 of the world's wealthy, industrial nations. It was founded by a grouping of Western European nations and the United States after World War II. It has since been expanded to include many Central and Eastern European countries as well as Japan, South Korea, Israel, Chile, Australia, and New Zealand.

Incomes in these countries are much higher than they are in the rest of the world. We thought this might be a good starting place when looking at whether the $60 per month that Americans pay for broadband internet is high or if it's just a product of the fact that Americans, being wealthier than many other people around the world, simply can and do pay more.

Here's what we found. (All prices in USD. Data from OECD)

Internet Costs Amongst OECD Countries

As you can see, the United States ranks second on the list of OECD countries, behind only Mexico, for most expensive internet prices. This number is more than double the cost of internet in other high-income countries such as Germany, Finland, Japan, Denmark, Austria, and South Korea.

Overall, the average cost of internet amongst OECD countries is $37.78.

Based on the numbers presented here, it seems that the United States has considerably higher internet prices than the other wealthier nations of the world.

However, it is worth considering the cost of living in some countries towards the bottom of this list, such as Poland, Latvia, Slovakia, Hungary, and the Czech Republic. All have an average cost of less than $30 per month for broadband, much lower than some of the countries towards the top.

Therefore, it's difficult to know how these prices line up with other expenses. In other words, we don't know if the $27 people pay in Hungary is more burdensome than the $50 that people pay in New Zealand, a country with high salaries and a high cost of living.

Using this line of thinking, it's clear that Mexico has far and away the most exorbitant broadband prices; a country where wages are just a fraction of what they are in the United States. Mexico's residents pay a whopping $65 per month on average for broadband internet access.

Price Per Megabit

One other thing to look at when comparing internet costs is the quality of the product being delivered, which we can measure in terms of price per megabit, or MB, the standard measure of internet data and speed.

Ideally, the countries paying more for their internet should be getting faster connections, meaning they are getting better value. Let's take a look at whether or not that's true:

Price Per MB

When we look at this table, the picture changes slightly. The US moves from 2nd on the previous list to 13th, with US residents paying around $0.43 per MB of data. The average internet speed, according to data collected by Speedtest.net, shows the average download speed in the US is 143.28 Mbps, which is good for 3rd overall amongst OECD countries.

All of this means that people in the United States generally pay more for internet and typically get more for their money. In theory, this is a good sign, especially since US wages allow for increased expenditures. Still, considering the issues with access discussed earlier, this points to a troubling trend - the digital divide between the rich and the poor. More on this later.

Let's take a look at how it stacks up against other parts of the globe. Speed data is from Speedtest.net and price data is from cable.co.uk

US vs. Europe

Many European countries are in the OECD, but we wanted to expand that list to examine how the US compares with the rest of the continent. Here is a ranking of internet prices in Europe:

Internet Costs In Europe

When we look at Europe as a whole, we can see that the United States pays more for broadband internet access than any other country on the continent; in fact, rates in the US are more than double the average, just $27.53.

Of course, it's important to consider that average speeds are much higher than in most of Europe. The US ranks seventh behind Iceland, Switzerland, Romania, Denmark, France, and Sweden in terms of average download speeds.

If we look at the price per MB, however, things look a little different:

Internet Costs In Europe - Price Per MB

Using this metric, the United States would have the 13th highest internet prices if it were a part of Europe. This is undoubtedly better, but it does show that internet in the US is still quite a bit more expensive than it is in most of Europe.

US vs. Latin America

Moving south of the US border, here's what the situation looks like in the countries spanning Latin America and the Caribbean. Not every country in the region is represented here, as recent, reliable data was not available for each. However, these countries give a good snapshot of prices in the region and how the US compares.

Internet Costs In Latin America

As you can see, once again, the United States is one of the ten most expensive countries for internet, ranking 7th on this list.

Broadband internet is generally more expensive in Latin America than in other parts of the world, especially Europe. The average price is $57.24, which puts the US more or less on par with the rest of the region. The median is $53.05, which suggests the US cost is still high, yet not by much.

However, when we look at the price per MB, we see a much different picture:

Internet Costs In Latin America - Price Per MB

With average speeds more than 50 Mbps faster than Panama, which ranks as having the second fastest internet connections in the region, the US appears to be the cheapest country for internet when looking at price per MB. 

In Haiti, which is repeatedly considered one of the world's poorest nations, at least in economic terms, people pay a whopping $8.15 per MB. This is for an internet connection that would not even be considered broadband in the United States (average speed is just 15.27 Mbps).

The trend continues throughout the region; ten countries pay more than $1/MB, four pay more than $2, two pay more than $3, and Haiti pays more than $8.

The US vs. Asia

Asia is the largest continent on the planet in terms of the number of countries, land areas, and populations. It is also the fastest growing in terms of population, and second only to Africa in its rate of economic growth. This combination of factors should produce a complex and widely-varying range of prices and speeds.

Once again, the availability of current and reliable data has prevented us from including every country on this list. However, we still feel this gives a snapshot of the region and how the US compares.

Here's the data:

Internet Costs In Asia

Once again, the United States is right near the top of the list. If it were in Asia, it would be the 8th most expensive country in terms of average monthly broadband price.

Yemen is an obvious outlier in this study as it is currently war-torn, speeds are extremely low, and prices are extremely high. This just shows how much conflict can disrupt what many of us now consider to be an essential service.

Excluding Yemen, the average cost of internet for the Asian countries included in this list is $40.98, which is a full $20 cheaper than what it costs in the United States. However, the average download speed in the region was just 62.44 Mbps, which is about 80 Mbps less than what customers in the US experience. As such, we should, once again, expect the price per MB story to be much different. Here it is:

Internet Costs In Asia - Price Per MB

Once again, Yemen is an extreme outlier, but when we organize the data in this way, the US appears to be much more competitive. In terms of price per MB, the US has the 14th cheapest internet compared with other Asian nations.

US vs. Africa

Here's how the US compares with African nations. Unfortunately, data across this continent is rather sparse, but based on what we could find, here's how the situation shakes out:

Internet Costs In Africa

Of the 29 countries included on this list, the US ranks smack in the middle - 15th - in terms of the average price of broadband. Mauritania is an outlier, and the average on the continent when excluding it is $77.09, meaning Africa is the only continent where US internet prices are below average.

This is quite shocking since we would expect the African continent, which is full of countries where economic and political stability is difficult to come by, to have quite expensive internet plans that reach only those who can pay for them. However, with an average speed of just 21.39 Mbps, the US has, on average, internet that is 6.6 times faster than any other country in Africa.

As such, we would expect the price per MB data to look a good bit different, and it does:

Internet Costs In Africa - Price Per MB

Like in Latin America and the Caribbean, the US has cheaper internet than Africa when looking at price per MB and is just one of two countries where that rate is less than $1.

However, in the other country, Egypt, wages are lower. If we look at how these costs compare to the average purchasing power of a typical consumer, the price of internet is actually about four times what's presented above. Considering Egypt is one of the more economically developed nations on the African continent, this paints a bleak picture in Africa where internet access is limited both in terms of quality and accessibility.

All in all, we can say with confidence that internet in the US is cheaper in terms of price per MB and also in terms of how heavy a burden it is for consumers.

The US vs The World

After looking at how internet prices in the United States stack up against different regions in the world, we compiled all the countries we studied onto one list to see where the US ranks in the world.

In terms of just price, the United States has the 29th most expensive internet globally, at least amongst the 117 countries included in our study. However, it has the 12th fastest average connection speed.

The average price amongst the countries studied, excluding Yemen and Mauritania, is $48.82, nearly $13 less than what people pay in the United States.

When we look at the price per MB metric, the US ranks 85th out of 117. The average, excluding Yemen and Mauritania, is $2.37 per MB, which is about five times more than what US customers pay.

This data looking at all the countries, combined with the region-by-region breakdown, brings us to one conclusion: The United States pays more on average for internet than the rest of the world, although those who do have access generally get some of the better connection speeds in the world.

Why is Internet so Expensive in the United States?

After looking at all the data we've put together, you're probably wondering why the United States, which claims to be the most developed, richest, and most free capitalist market in the world, has such high prices. Shouldn't the market bring prices down amongst a consumer group that is quite demanding? In theory, yes, but here are a few reasons why this isn't the case:

Competition (or lack thereof)

The main reason Americans pay so much more for the internet than the rest of the world is that very few people in the US have much of a choice when it comes to internet providers. This is particularly true if we only look at those who can provide a broadband connection - one that exceeds 25 Mbps download speed.

According to a study by PC Mag, 70 percent of Americans have either zero or just one option for broadband providers in their area. For a competitive and free market, there should be at least three different options, which almost no area in the country has.

This lack of competition means that ISPs have little incentive to lower prices, and this lack of incentive is made stronger when we consider how people need the internet. In other words, ISPs don't have a reason to change, and because consumers need internet, they have no choice but to accept higher prices.

Such a situation represents a breakdown in one of the basic tenets of market economics and needs to be rectified. Of course, there are reasons why there is so little competition, the most significant being the infrastructure needs of a wired broadband network, which are expensive to set up.

However, the US has faced this situation before, when electricity and other common utilities became the norm in most households. The government responded with regulatory measures to ensure that these services could be delivered by just one or two companies, which is more efficient, but without price gouging and overcharging.

Such a move is likely needed in the world of broadband internet. That it hasn't happened yet is somewhat surprising, but let's not forget that the internet has only been mainstream since the 1990s, and only in the last ten to fifteen years has it become an absolute necessity. Legislation and regulation usually lag behind technological innovation, but the time is approaching to take action. Otherwise, Americans will continue paying far more than they need to for a basic internet connection.

Lack of Infrastructure

We must remember that the United States is a vast landmass with many interesting yet challenging geographical features. As such, it shouldn't come as much of a surprise that rural and remote areas don't have the infrastructure needed to get broadband internet. The nation has built roads, laid railroad tracks, put up electric and phone lines, and much more despite being large so that it's difficult and expensive is not a great excuse.

One issue is time - again, the internet is still relatively "new" - but it's grown in society so quickly that a speedier response than the one we've had to similar crises in the past time is needed.

Focus on Urban Consumers

Because broadband internet is a wired technology - not unlike electricity in its infrastructure needs - there is a strong incentive for ISPs to focus their efforts on densely populated areas. This makes sense, as laying cable in a city can lead to millions of connections and subscriptions, but doing so in a rural area might cost the same if not more than it would in an urban area but without anywhere near the same returns.

This is why we see numbers like those we discussed in the introduction - that 160 million Americans don't have broadband. Urban consumers also tend to have more discretionary spending, so they are an even better target. All this does is leave out rural consumers, forcing them to either pay more, accept less service, or both.

Once again, this is an area where government intervention could be needed. During the 1930s, President Franklin Delano Roosevelt, under his New Deal mandate, invested heavily in the infrastructure required to bring electricity to rural homes, boosting access in a short time while also providing jobs to a depression-struck populace. Something similar could be done in the US with internet infrastructure.

As it stands, ISPs do receive government subsidies to connect rural areas. Still, Gigi Sohn, the former FCC director quoted at the beginning of this article, has admitted that no FCC has been able to adequately enforce that these subsidies are spent wisely. Considering how many millions of Americans still don't have broadband access, it appears this money is either not enough or being spent in other ways that are contrary to their purpose.

Additional oversight is needed, which, of course, requires funding. In today's political climate, such action seems unlikely, leaving the future of internet access in the United States uncertain.

Conclusion

Overall, those who have internet access in the United States typically get better internet than most other people in the world but pay more for it than pretty much everyone else on the planet. This is concerning at any point in time. Still, the coronavirus pandemic has also highlighted just how much we depend on the internet to survive and what it means to those who don't have access to a reliable connection.

However, while this problem is severe, it is more than fixable should politics and industry find a way to support the common good.

If you're interested in resolving this problem, consider contacting your elected officials to lobby for them to press more firmly for change in this ever-important area of American life.