Apples vs. Oranges: Why Providing Broadband in the United States Costs More Than in Europe

Comparisons between U.S. and European broadband prices abound, but their respective markets are built on such entirely different cost structures as to make any comparison between the two meaningless without accounting for the differences in necessary expenditures.

By Jessica Dine and Robert D. Atkinson. They are both with the Information Technology & Innovation Foundation. Excerpt:

"KEY TAKEAWAYS

A longstanding narrative that U.S. broadband prices are exorbitantly higher than their European peers’ buttresses claims of European superiority and calls for similar unbundling requirements and regulated competition in the U.S telecom industry.

 

However, U.S. broadband providers bear 53 percent higher costs than European providers pay for equivalent labor, capital investments in network infrastructure, spectrum licenses, advertising, and taxes minus subsidies.

 

U.S. telecom workers’ wages are higher than those in Europe, while U.S. capital expenditures surpass EU infrastructure investments both overall and per household. Critics would be hard-pressed to argue for cost-cutting in these areas.

 

On the other hand, European telecom companies are taxed at a lower rate than U.S. providers and receive more government subsidies. In every regard, U.S. providers must pour proportionately higher amounts into essential expenditures.

 

Finally, 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.

 

Comparisons between U.S. and European broadband prices are meaningless at best and misleading at worst when they fail to account for the difference in deployment and operating costs that must necessarily be assumed, at least in part, by consumers."