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Summary:

Corporate spin alert: Verizon’s president and COO, Dennis Strigl, in a speech this week suggested that three-quarters of American households have two broadband providers to choose from. He went on to compare the broadband penetration of Massachusetts and New Jersey with that of Korea and Japan. I think his analogy needs a closer look.

Verizon President and Chief Operating Officer Dennis Strigl made a big splash at NXTcomm 08 yesterday when he announced that the entire Verizon FiOS footprint could now get speeds of 50 megabits per second. Typically such bandwidth news wouldn’t cause that much of a furor, but there wasn’t much to write home about from the show, which was held in Las Vegas this week.

In his speech, Strigl pointed out that the U.S. has the highest number of broadband users when compared with other countries, in particular that broadband is available in every U.S. zip code. Good point — and one that I’ve made in the past myself — except that it’s no longer true. By that metric, China now leads. Yes, the FCC used to defined broadband as a service that offered, at a minimum, 200 kbps downloads, but it’s since changed that requirement to 768 kbps.

But where Strigl went too far was when he suggested that three-quarters of American households have two providers to choose from — aka a duopoly, which is not my idea of a competitive marketplace. If you factor in wireless and satellite, he said, there are actually six or seven competitors. Talk about twisting the facts to fit one version of the truth! This part of his speech, however, had me choking on my breakfast cereal.

“Massachusetts and New Jersey have similar population density to Korea and Japan and similar broadband penetration. Unlike other countries, what we have accomplished has come not through [government] policy but through private investment.

How telling. So subverting government policy via lobbyists and highly biased friends at the FCC to ensure a future monopoly is all part of good, capitalistic, private investment theory? Maybe Harvard can include that in its future MBA curriculum.

Regardless, I thought it would be fun to see how Massachusetts and New Jersey really square up against South Korea and Japan when it comes to the price of a broadband connection:

Average broadband speeds in South Korea and Japan are 49.5 megabits per second and 63.6 megabits per second, respectively. The average U.S. speed is about 4.9 megabits per second, making it the 14th-fastest country in the world. The average price in South Korea and Japan is about 83 cents per megabit. In the U.S, it’s about $2.83.

But since it would be unfair to use average U.S. stats, I went with Verizon’s prices, the ones it’s going to offer in Massachusetts and New Jersey. On Verizon’s FiOS network, a 50 Mbps connection costs $140 a month — or about $2.80 a megabit. In fact, if you went with Verizon’s 20 Mbps service, you would be paying $3.25 per megabit. (To be fair, Verizon’s price-per-megabit is still cheaper than the $5.25 Qwest charges for its 20 Mbps connection, which costs $105 a month.)

In other words, not until Verizon starts selling a 50 Mbps connection for $41.50 a month and 20 Mbps fiber connection for $16.60 a month can Strigl get away with comparing U.S. broadband with that of the rest of the world.

  1. Om, if one household in a zip code has broadband, the FCC defines the whole zip code as broadband covered! Just one. And the FCC defines broadband as anything above 200kbps!

    see http://dealarchitect.typepad.com/deal_architect/2008/01/one-house-per-z.html

    Wow, we set the bar real high for our “privatized” telcos. And provide them immunity, too! No wonder Verizon and AT&T come across so humble sounding…

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  2. @ Vinnie,

    I agree with you and think that this ZIP code is a scam and the definition of broadband as 200 kbps is deplorable. Funny thing is about four years ago I talked to regulators in India and spent time with them talking about why they need to think beyond the normal definitions of broadband. I told them then, FCC was just plain old stupid in holding on to that metric. Unfortunately they went with 200 kbps. It made it clear to me that regulators are basically taking the route of lowest common denominator and playing it safe and political – not trying to upset the phone companies because most of them want to go work for those guys. I think it is across the board in my opinion.

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  3. Om, not to sounds like a fan boy, but lay off Verizon until you understand networking better. Also, it is the charter of an corporation to make money; what the market will bear will determine the price.

    I think you missed the whole point of Strigl’s message. So we pay more per MB for broadband; the real comparison is latency. Having traveled to many places I’ve got to say, the latency in the US is far superior to anywhere else in the world. Thus a 5M pipe with low latency will provide a better user experience than a 50M pipe with high latency.

    It does not matter is you got a 50M pipe in Japan if your 5M pipe in the US allows you to browse and get your email faster.

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  4. @Meaux Ji
    Are you comparing the latencies to servers within each country or are you comparing the latency in the US with US based servers with latency in other countries to those same US servers? There is a slight problem in your comparison if you are doing the latter.

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  5. Yes but whats the point of latency in upstate New York when the NY Attorney general has just killed Net Neutrality in the USA?

    http://www.facebook.com/topic.php?uid=22212833295&topic=4598&ref=mf

    Dean

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  6. I live in brooklyn and i pay about 60 for the 30mbits from cablevision…with it comes free hosting,able run a web server so i think i getting a deal.

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  7. I live in New Jersey. I have news for Verizon…the southern border of the state is not East Brunswick.

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  8. I would call myself and average verizon customer. As far as the browsing and internet connection speeds they’re doing a really good job on that side from me in nyc. The only issue with verizon is horrible customer service and random chargers they like to slip into bills. I consider myself lucky since i know someone on the inside who helps me out if there is a problem.

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  9. Om, you jumped on your high horse to analyze Strigl’s statements and then threw out your own misleading numbers. So, the cost of broadband is more expensive in the US. Are the average incomes in the countries you compared to the US the same as the US. If their broadband service is 2 cents a month, and the average citizen can not afford it, does it matter that it is cheaper than the US service?
    And yes, schools should be teaching future capitalists how to use the system they will become a part of.

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  10. [...] Om Malik of GigaOm provides a superbly constructed rebuttal to Stringle’s utter nonsense: Average broadband speeds in South Korea and Japan are 49.5 megabits per second and 63.6 megabits per second, respectively. The average U.S. speed is about 4.9 megabits per second, making it the 14th-fastest country in the world. The average price in South Korea and Japan is about 83 cents per megabit. In the U.S, it’s about $2.83. [...]

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