Why are U.S. internet prices so high? The answers are many and complex

By Mark Pattison | Catholic News Service

WASHINGTON (CNS) — The cost for broadband service in the United States is high, and getting higher. In most metropolitan areas of the United States, residents are lucky to have two competing providers from which to choose. A third player in large metro markets is rare, but it’s been seen before.

The U.S. bishops have argued for greater internet access for all. The U.S. Conference of Catholic Bishops, during the coronavirus pandemic, was a member of an informal coalition that sought to expand access to the internet in unserved and underserved areas.

Parents scrambled to find hotspots so their children could do their homework and keep current on their assignments and this led to a lot of fast-food parking lot homework sessions to access the eateries’ Wi-Fi.

Americans living just beyond an established network were given five-figure quotes by internet service providers to get connected.

People use an iPad and a laptop computer in New York City Aug. 25, 2020. (CNS photo/Andrew Kelly, Reuters)

Assuming one does get internet connectivity, the quality of the experience can be lacking a certain something. Speed, perhaps. Internet service providers boast of “speeds of up to” in their advertising. But rarely if ever do they disclose an average or a median speed for consumers’ internet connection. Guaranteeing a speed “floor” seems quaint.

One reason for the absence of speed: the lack of net neutrality.

In 2017, when it had a Republican majority of commissioners, the Federal Communications Commission threw out net neutrality rules, thus giving internet service providers a green light to charge more for higher quality service or high-bandwidth websites that accommodate streaming services, for instance. Providers also no longer had to guarantee minimum speeds for their own customers to access streamers’ content.

The U.S. bishops have advocated for net neutrality — the notion that all legal internet traffic should be provided equally. In February 2015, this became federal policy, thanks to the FCC under the Obama administration.

Now under the Biden administration, congressional Democrats want net neutrality restored. So what’s the hang-up?

The Senate needs to confirm one more FCC commissioner — Gigi Sohn, who would give the five-member FCC a Democratic majority.

So if Democrats occupy the White House and majorities in both houses of Congress, why can’t Sohn be confirmed?

The answer: Because Republicans know some of their top gains in recent years would probably be reversed if a third Democrat were to join the commission. That first target could well be net neutrality.

Sohn, one of the founders of Public Knowledge, a consumer-oriented think tank and later an FCC policy adviser, was nominated last October by President Joe Biden. If Biden had wanted the FCC to act on his many communications-related pledges he’d made during the 2020 campaign, the nomination would have come nine days after his inauguration, not nine months. Now the nomination has languished despite two Senate confirmation hearings — itself a rarity.

The clock is ticking toward an August recess for the Senate. There may be a little bit of time in September to handle the Sohn nomination if not taken care of in the summer. But if Republicans recapture a Senate majority in the November midterm elections, no lame-deck session is likely to push the nomination forward, nor is the Senate likely to confirm Sohn during the 2023-24 Senate session.

The FCC hasn’t even begun discussing net neutrality without a fifth member on board, Meanwhile, Americans continue to pay more for service levels that don’t meet the advertising claims and with higher costs to boot.

Congress could tackle net neutrality, and the Senate has introduced the Net Neutrality and Broadband Justice Act. It’s only two pages — probably fewer words than this article — but the bill would reclassify broadband as a telecommunications service, thus putting broadband providers under the FCC’s jurisdiction. And scrutiny.

But the same clock that’s ticking on the Sohn nomination is ticking on this piece of legislation. Moreover, the bill would have to pass both houses of Congress. And with the 50-50 split in the Senate, it may be easier to find 10 needles in a haystack than to find 10 Republicans in the Senate to back it and avoid a filibuster.

And if the composition of either chamber of Congress changes in the midterm elections without a bill getting passed, it might as well go to the dead letter box before the next postal rate increase.

Speaking of higher prices, the Information Technology & Innovation Foundation issued a report July 11 comparing U.S. and European costs of broadband.

It found that U.S. broadband providers bear 53% higher costs for service rollouts than the aggregate costs of European providers’ rollouts. All expenses are higher in the United States than in Europe, and the government subsidies are lower in Europe.

Examined more closely, U.S. labor costs are 15% higher than Europe’s costs, but labor accounts for only 14.25% of all U.S. broadband costs. U.S. advertising costs are 105% more than Europe’s, and U.S. providers’ taxes are 70% more that what their European counterparts pay. But ads and taxes together don’t match the U.S. labor costs, which were fairly small to begin with.

Government subsidies aren’t to blame either. Governments at various levels in the United States give $2.5 billion in subsidies to providers, compared to Europe’s $3 billion. The big factor is the cost of providing the spectrum, $54.5 billion in Europe but $105.2 billion in the States.

One of the reports “key takeaways” is that “in response to allegations that U.S. providers artificially raise prices and pocket the difference, an analysis of operating profits shows that European broadband companies have an average profit higher than their U.S. peers.”

Pattison is media editor for Catholic News Service.

Author: Catholic News Service

Catholic News Service is the U.S. Conference of Catholic Bishops’ news and information service.

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