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:
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)
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:
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:
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:
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.
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:
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:
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:
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:
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:
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.
