Joe Biden and Kamala Harris say Americans pay too much for the internet and more than people in many other countries. Both these claims are false

See Fact-Checking Biden And Harris On Broadband Affordability by Roslyn Layton.

"Joe Biden and Kamala Harris say Americans pay too much for the internet and more than people in many other countries. Both these claims are false, and this article explains why. These assertions are based upon a multi-year advocacy campaign under the rubric of Cost of Connectivity by the Google-backed New America Foundation (NAF). I have fact-checked this report since 2013 as have ITIF (2020) and others. The Phoenix Center’s George Ford addresses these claims in today’s House Energy & Commerce Committee hearing on “Broadband Equity: Addressing Disparities in Access and Affordability.”

While the report recognizes that there are many costs to connectivity, it draws conclusions not on the reality of the actual costs that people pay (which requires the detailed analysis of subscriber bills) but from sticker prices and promotions, scraped from ISP websites in an assortment of major cities around the world.  NAF then constructs the data to fit its pre-determined conclusion that Americans pay too much and that municipal provision is automatically better, even though none of the foreign ISPs it celebrates are municipal providers. In fact, the European Union has outlawed subsidies in areas where private provisions exists or is planned in the next three years. NAF’s policy end game is not more competition (which is created by wireless networks) but a government monopoly of broadband with internet prices, traffic, and content controlled by the Federal Communications Commission (FCC). This Ma Bell regime for the internet would harm consumers and innovators.

Torturing the data until it confesses

NAF derives its conclusions through three types of manipulation: it excludes market factors that don’t favor its preferred conclusions; it engineers the model with favorable data; and it distorts inconvenient data. The report performs a technological discrimination by deeming pure fiber to the home as the only acceptable network. Plans that include fiber hybrids like cable/fiber, DSL/fiber, and 5G/fiber, common in evolving markets, are disqualified from the study. In fact, wireless broadband, the larger and more quickly growing technology in the US and the world, is dismissed all together as a viable technology. If the study included 5G, the US would be the clear winner.

Deconstructing the “Europe is better” narrative finds that NAF’s dataset includes a preponderance of DSL plans. In general, older, slower technologies cost less, and the EU applies additional price controls to keep prices low. However EU policymakers recognize that the cost of this approach is less network investment and dynamism. Wisely, US policymakers realized that incentivizing competition between technologies is a better model than controlling access to incumbent’s infrastructure. NAF’s “international” study has no discussion of China, the world’s largest broadband market and whose single largest provider has more subscribers than the US and EU combined. 

The report willfully distorts data. It praises a municipal provider in Idaho for a seeming low price, without including the mandatory $16.50 monthly utility fee. Similarly NAF omits the mandatory media license fees which many nations levy on broadband subscriptions to fund the national broadcaster—amounting to an additional $10 per month in Tokyo, $17 in London, and $30 in Zurich. This adjustment alone breaks NAF’s model.

International comparisons, however interesting, are meaningless without context. It is intellectually dishonest to present broadband prices without discussing market structure, regulatory policies, and local and national laws.  There are good reasons for broadband prices to differ including geography, density, and distance. The NAF also excludes the fact that Americans consume 2-3 times more content per person than Europeans, and when compared on a unit cost basis for the relevant plans, US prices are lower.

Getting the policy right for equity and affordability

While it is true that some 5 percent of American households can’t afford broadband, that number is falling with smarter policy solutions like broadband plans targeted to address digital divide challenges coupled with devices and training. Affordability is a demand, not supply, issue. John Horrigan, leading authority on broadband adoption, shows that adding duplicative networks does not improve adoption for low-income households. It is far better to give money directly to end users (like the FCC’s Emergency Broadband Benefit which provides $50 per month to eligible households) rather than sponsor intermediaries like local government, the least efficient and experienced actors to deliver broadband. A Biden-Harris plan would use taxes and deficit spending to fund cities which already have networks while the Senate’s Wicker-Blackburn bill would establish a $65 billion reserve fund from 5G spectrum auction proceeds and direct it to people in unserved areas, Tribal lands, and minority communities.

In any event, the Biden-Harris Administration could make the greatest contribution to equity by incorporating the one set of actors which consistently avoid social responsibility for broadband infrastructure. Big Tech platforms profit more than any other segment from the internet but pay almost nothing for middle and last mile broadband infrastructure, particularly on rural fiber networks.  Moreover, two-thirds of American households spend some $25 per month on top of broadband for streaming services from Netflix, YouTube, Amazon Prime, Disney+ and Microsoft Xbox. This reality contradicts the claim that Americans don’t have money to pay for broadband.

The lack of economics in the Biden-Harris broadband proposal is unfortunate. If broadband is increasingly valuable, then it is illogical that it should fall in price. In fact, we pay more for things that let us do more and save us time and effort. The pandemic proves that broadband is essential: we now work, learn, shop, and get health care from home. It makes sense that faster, more advanced networks cost more. If not, there is little incentive to upgrade. In practice, broadband providers could have raised prices during the pandemic, but they didn’t. Instead they waived late fees and offered free service in solidarity and social responsibility with their customers. Consumers have enjoyed a broadband surplus for years and have likely underpaid given the value. But telling the truth means that the market is working and destroys the Biden-Harris case for government takeover."