Collecting data on international broadband prices is more difficult than it seems. Different countries offer different combinations of services and varying terms, all of which typically are described in languages other than English. The resulting challenges appear to have been too much for the authors of the new NAF Report on the Cost of Connectivity to overcome. At the very least, the data reported for Copenhagen, where I live, is factually incorrect.
The NAF report lists Copenhagen as one of 22 cities deemed “speed leaders,” offering the best bang for the wired buck, the best bang for the mobile buck, and ranking #1 in the world for the lowest cost of 2GB of data.
For the wired speed leader category, the company Stofa (0) is listed. First of all, Stofa is not available in Copenhagen. It is owned by a utility company called South Energy (Syd Energi), based in the province of Jutland, some 160 miles from capital. This entry should be disqualified.
In any case, the broadband product NAF mentions for $77.99 cannot be purchased unless a customer first purchases the basic cable TV package for at least $30, which only includes 30 basic channels. Most Danes demand more channels, especially sports, so the real price for this package is over $110 per month.
A best bang for the buck for wired entry goes to the cable offering, YouSee. This broadband package also requires that customers buy basic pay TV first. Incidentally YouSee is the leading cable provider in the country, and is owned by TDC, the old monopoly telephone company. That AT&T would own Comcast is unthinkable, but that is the case in Denmark.
Next the report lists the discount brand Fullrate as the best bang for the mobile buck and best price in the world for 2GB of data. First let it be noted that Fullrate is also owned by TDC. The two prices shown were actually summer promotions. The normal price is some 30% higher, and it requires a sign-up fee. In fact, I can find four Danish mobile providers who have better ongoing offers including Oister, CBB, Bebop, and 3.
In any case, low prices are not driving people to Fullrate. The company has just 10,000 mobile customers. In fact 90% of this company’s customers sign up for its DSL product. In spite of what NAF says, price is not everything.
If the goal of the NAF report is to encourage policy makers to promote competition, don’t look at Denmark as a guide. Some 68% of Danes get their broadband from the incumbent provider TDC or one of its daughter companies. Americans would call that a monopoly. No single American carrier has a market share as high as TDC.
Here is the fallacy of European competition: incumbents have to lease their infrastructure at low wholesale rates. Plenty of virtual providers take advantage of this bonanza, but over time, this model is so unprofitable for the incumbent that it does not invest in further infrastructure. What carrier would want to expand its footprint if it was required to lease its facilities to its competitor at a barely break even rate?
A serious paper should clearly state its methodology, limitations and assumptions, but this paper does not. There is no discussion of tax treatment, for example. Some European countries have value added tax as high as 25%. It is not clear whether prices have been adjusted for taxes across the country. That surely would change the outcome of the study.
A study of broadband in cities will give a different perspective than one of suburbs or rural regions. As for Europe, next generation broadband is mainly available in cities. It’s great for Parisians to have low prices and high speeds, but it’s another story outside the capital. See my earlier blog post (1) for more discussion.
Conspicuously absent from this report is OECD data. The OECD is the most comprehensive and authoritative source of broadband data, and it gives a different view of American broadband prices. See the Communications Outlook (2) report from July 2013. The OECD’s 2011 report showed that the US ranged between $1.10-71.49 for advertised price for megabit per second, but that number has fallen to $0.53-$41.70 in the 2013 report. This shows a 51% improvement at the low end and a 41% improvement at the high end. Some countries have lower prices, but the decline of the price for the US shows that things are getting better, not worse, for broadband. Furthermore rather than the makeshift bundle comparisons offered by NAF, looking at the same apples-to-apples units across countries, such as megabits per second, is a more fair measure.
The bibliography of the NAF report lists only newspaper articles, blogs, and a single reference to the FCC. Apparently NAF authors could not push themselves any harder to review the growing literature on this important topic, which also gives a more serious discussion of prices.
I have followed New America Foundation’s work over the years. They have produced original and insightful analysis at times, but this report is not an example. It surprises me that NAF’s Open Technology Institute with dozens of staff cannot do better. I have exposed the mistakes just for Copenhagen. For a broader critique, see expert Richard Bennett’s assessment (3), also here on TechPolicyDaily.com.