Comparing broadband in the EU 15 and the United States
While broadband penetration levels in the United-States near European averages, America’s tariffs are much higher than Europe’s. Analysis and explanation…
The US broadband market is dominated by cable technology …
Graph 1 : Broadband penetration rates in 2007per technology
In 2007, broadband penetration in the United States totaled 23.3%, equivalent to the EU15 average. What qualifies as broadband varies from country to country. While broadband in the United States is defined as a line exceeding 200 Kbps in at least one direction (upstream or downstream), in Europe a broadband line implies downstream access as of 512 Kbps.
Cable access continues to account for more than half (52%) of broadband access via cable networks versus 42% for ADSL and 6% for other technologies. As a result, ADSL penetration comes to a mere 9,7%, due to the failure of unbundling regulation and its highly complex implementation. This weakness stems from the failure of regulatory unbundling regarding the effective scope of the Federation Communication Commission’s (FCC) definition of network elements to be included in unbundling and which leave the final decision across each zone to the local regulatory agencies and the incumbent.
This complexity serves as a barrier to entry for new operators, thereby impeding the right conditions for competition. As a result, a number of states have an established market duopoly, whereby the cable operator and the ADSL supplier (an ISP) are both offshoots of the local incumbent. Finally, in many rural areas, the number of suppliers providing ADSL services is limited to one.
…with limited price competition.
Graph 2 : ADSL market share of incumbents and new entrants at end-2006
While in the United-States, regional incumbents control 96% of ADSL plans, in the United Kingdom, the incumbent posts only 32% of the overall lines. In the United Kingdom, however, alternative operators can access the incumbent’s network, BT, via the bit stream to sell their own offers. In short, across the US, the number of unbundled lines totals 1.3 million, or 9.9%, which is relatively low compared to other European countries (cf. Graph 3).
Graph 3 : Percentage of unbundled lines in overall number of market lines at end- 2006
In either Germany or France, the number of unbundled lines respectively totals 37.1% and 29.5% of ADSL lines. The same figure in the US is a mere 14.5%. To speed up unbundling, the FCC has loosened regulation in terms of shared infrastructure and is encouraging the emergence of new technologies.
For the time being, however, the barrier to entry on the American broadband market impacts US prices which remain high compared to European levels.
Graph 4 : « Triple play » monthly tariff plans (VAT incl.)
Prices at March 1: 2008
Triple play offers in the United-States are much higher than in Europe. An American subscriber pays an average $100, whereas Europeans pay 50% less. A triple play offer in France, for example, costs $46.5 (the benchmark’s cheapest offer: includes VAT and the dollar/euro exchange rate totaled 1€= 1.55 $ and 1£ = 1.99 $).