Americans Paid $400 Billion in Taxes & Internet Surcharges for Fiber Optic Upgrades that Never Came
South Korea is the poster child for high-speed internet: its fixed-connection and mobile download speeds are consistently among the fastest in the world, and its capital city, Seoul, is completely saturated with Wi-Fi. How did they do it?
Being densely populated helped: it’s easier and cheaper to wire-up crowded cities than empty countrysides. But the key element was the government’s pro-broadband policies. Not only did they open up the market for competition among internet service providers, but they also invested in hard infrastructure.
Back in 2011 the New York Times reported that the South Korean planned investments of $24.6 billion in digital infrastructure. It paid off: South Korea’s internet remains among the world’s fastest, according to testing done by Speedtest—and this is in spite of massive recent gains and investments made by other countries.
Meanwhile, America’s internet connections are slow. This summer Forbes Magazine reported:
The US ranks 9th in the world in fixed broadband speed at 70.75 Mbps average download and 27.64 Mbps average upload. Ranking in the top ten is good but the US’s average download speed is less than half top-ranked Singapore’s 154.38 Mbps. Both upload and download speeds increased steadily from July 2016 to July 2017 and the US’s rank increased from 11 to 9.
The picture for the US is not nearly as good when you look at mobile internet speed where the US ranks 46th, just ahead of Albania and behind Oman. Average download speed in the US is 23.05 Mbps which is less than half the average download speeds in Norway, the Netherlands and Hungary. Average upload speed in the US is 8.26 Mbps. While mobile download speed increased by almost 20% from July 2016 to July 2017, the US’s world ranking fell from 44th to 46th. Not good.
Since then America’s fallen down to 11th place in terms of fixed connection download speed, and 47th in terms of mobile download speed. Basically, America’s internet is slow, and it’s getting relatively slower. This will have big economic consequences down the road as the world grows increasingly digital.
But that’s not the real story here. More important is America’s failure to keep pace with countries like South Korea despite absolutely astronomical investments in broadband technology.
According to a fairly recent book (2015) called The Book of Broken Promises, the American people have been charged some $400 billion by telecom companies (at the insistence of government) for fiber optic upgrades that have not materialized. The author writes:
By the end of 2014, America will have been charged about $400 billion by the local phone incumbents, Verizon, AT&T and CenturyLink, for a fiber optic future that never showed up. And though it varies by state, counting the taxes, fees and surcharges that you have paid every month (many of these fees are actually revenues to the company or taxes on the company that you paid), it comes to about $4000-$5000.00 per household from 1992-2014, and that’s the low number.
You were also charged about nine times to wire the schools and libraries via state and federal plans designed to help the phone and cable companies.
And if that doesn’t bother you, by year-end of 2010, and based on the commitments made by the phone companies in their press statements, filings on the state and federal level, and the state-based ‘alternative regulation’ plans that were put in place to charge you for broadband upgrades of the telephone company wire in your home, business, as well as the schools and libraries — America, should have been the world’s first fully fibered, leading edge broadband nation.
In fact, in 1992, the speed of broadband, as detailed in state laws, was 45 Mbps in both directions — by 2014, all of us should have been enjoying gigabit speeds (1000 Mbps).
Of course, this didn’t happen. America has relatively slow internet, and just a 9.4 percent penetration rate for fiber optic cables, according to Business Insider—this is less than half the OECD average.
The Trump administration would be wise to make improving America’s digital infrastructure a priority. The South Korean model, market liberalizations combined with hard investments, could be a viable model.