Britain in America’s Rear View Mirror

Ofcom, the UK’s FCC, has published a broadband scorecard comparing Britain’s broadband networks to those of the other large European economies: France, Germany, Spain, and Italy. The report compares broadband deployment, subscription, use, and price in the five European nations that are most comparable and offers limited but interesting insight on performance.

The Brits are taking some stick from European critics who wanted Ofcom to produce a more comprehensive ranking against the entire EU-27 and especially speed merchants Latvia, Netherlands, Bulgaria, Romania, and Sweden. In Ofcom’s defense, the report does include an appendix that provides data on the rest of the EU.

The report is especially interesting as it comes on the heels of our report, The Whole Picture: Where America’s Broadband Networks Really Stand, on the ranking of U. S. broadband versus other nations, especially those in the EU and the OECD.

The UK is the only nation other than the U. S. to publish SamKnows data on broadband speed, so the limited data it has on performance is directly relevant for us. As readers of our report will know, there are many methods of measuring broadband speed, each with its own pitfalls. For purposes of international comparisons over time, the only dataset worth consulting is the one gathered for Akamai’s quarterly “State of the Internet” reports, so we relied heavily on it for our report.

The Akamai data are not without ambiguity, however, as they report substantially different values for Average Peak Speed and Average Connection Speed. The first is the mean of the top speeds of all IP addresses they measure, and the second is the average speed across all connections made by all IP addresses. According to Akamai, the Average Peak measurement “is most representative of Internet connection capacity” and Average Connection Speed provides the best insight into user experience while performing a range of activities on a shared connection. In the most recent period, Akamai reports an Average Peak of 29.6 Mbps for the U. S., and an Average Connection Speed across all TCP sessions of 7.2 Mbps.

In contrast, the FCC’s SamKnows data (pages 5-6) shows U. S. has an average speed of 14.6 Mbps, right in the middle of the two Akamai measurements:

During the testing period for the August 2011 Report, the average speed tier was 11.1 Megabits per second (Mbps);  for this Report, it increased to 14.3 Mbps, an almost 30 percent increase in just one year. Because ISPs also did a better job in the testing period for this report of meeting or exceeding their advertised speeds, the actual increase in experienced speed by consumers was even greater than the increase in advertised speed—from 10.6 Mbps to 14.6 Mbps—an almost 38% improvement over the one year period.

The Ofcom report says that the UK’s average broadband speed, by the same SamKnows system the FCC uses, was 9.0 Mbps in May, 2012 and 6.8 Mbps in May, 2011. Over the same period, the U. S. increase was 38%, and the UK increase was 32%. American broadband networks are not only faster than those in the UK, they're also improving more rapidly, or "getting faster faster."

Source: SamKnows / Ofcom

The Ofcom reports shows that the UK leads the EU-5 in terms of “standard speed” broadband deployment, mobile deployment, Internet usage, and competition between both wired and mobile networks. It’s particularly noteworthy that the UK leads competitors in “regularly accessing the Internet,” and “buying goods or services” online. In terms of creating an ecosystem that can support continued Internet growth, these are key factors. Spreading the cost of networks across a large and engaged user population also helps keep end-user prices low.

The UK falls behind its rivals in the “superfast” network deployment and adoption, which the report defines as 30 Mbps. Despite the fact that the UK has moderately good cable modem deployment - 75 percent can buy it if they want - the market for higher speeds hasn't developed.

Pricing doesn't seem to be the problem, as Ofcom says 30 Mbps broadband is cheaper in the UK than in the rivals, but availability is, as it ranks third out of five in 30 Mbps deployment. The greater experience with the use of actual Internet services plays into this result as well, since we can't ignore the fact that Britons are more sophisticated Internet users than the French, Germans, Spaniards, and Italians. Perhaps cost-conscious Brits don't see the upgrade from 10 to 30 Mbps as valuable at any price. This reflects a pattern we found in global pricing, where the average price of the 5 - 20 Mbps tier is less than $2/month higher than the sub-5 Mbps tier. If consumers perceived greater value in higher speeds, we'd expect a greater disparity.

The market concentration figures are also noteworthy: America’s broadband gadflies tell us the market for wired and mobile broadband in the U. S. is dominated by monopolies, but our markets are actually less concentrated than those in Europe.

• America’s two leading mobile brands (Verizon Wireless and AT&T) control 32% and 30% of the market respectively, and in wired broadband the leading brands are even more dispersed, with Comcast at 23% and AT&T at 20%.
• In the UK, the leading mobile company has a 33% share and the leading wired company has 31%.

While the UK has the most competitive markets in the EU-5, U. S. broadband markets are even more competitive.

Competition doesn't always lead to high speeds, low prices or high usage, despite another claim our gadflies like to make. The appendix shows that the lowest broadband prices in the entire EU are found in nations with very little Internet use, such as Lithuania, Romania, Latvia, and Bulgaria.

Source: VDMC / EC, Broadband Internet Access Cost, 2012.

The nations with low prices and low usage also tend to have high speeds, as you would expect. With the exception of Czechoslovakia, there was no cable TV in the Soviet satellite states, so the broadband infrastructure in the more Westernized parts of the former USSR is heavily weighted toward new networks with a lot of fiber. If the infrastructure is new but few use it, performance will be high and prices will tend to be low in order to induce new users to come on-board. The exception in this picture is Sweden (SE) where a new fiber net serves Stockholm high-rises for very low prices. There’s nothing like vertical living and government subsidies to keep that monthly bill low.

So what’s the UK going to do about its dismal standing in high-speed broadband? Some things are already moving:

• Virgin Media began a programme upgrading all its customers to higher-speed packages offering headline download speeds of 20, 30, 60 or 120Mbit/s;
• Openreach introduced FTTC plus VDSL technology that allows speeds of up to 80Mbit/s. It also introduced FTTP lines that allow up to 330Mbit/s. BT Retail, TalkTalk, BSkyB and a number of other retail providers are exploiting these; and
• Subsidized superfast broadband has been deployed in Northern Ireland, which has the highest proportion of premises in rural areas in the UK. Since 2009, the Northern Ireland Department of Enterprise, Trade and Industry and BT have invested in the rollout of superfast technologies to Northern Ireland so that they were available to 95% of premises in 2012, but only 11% had taken them up.

So that looks like the same blend of intermodal competition we have in the U. S. between cablecos and telcos, coupled with subsidies for a single provider in rural areas, all powered by technology that’s getting faster and cheaper every day. It’s worth noting that the UK practices “broadband unbundling” where the incumbent (BT) is required to make its wires available to competitors at prices set by the regulator. Despite this practice, which is urged on the U. S. by gadfly Susan Crawford and others, the UK broadband market is still more concentrated than the U. S. market.

The figures on uptake in Northern Ireland raise eyebrows, however: If 95% can get “superfast” broadband and only 11% want it, something is seriously wrong. Either the standard broadband is pretty darn good and doesn't need replacing, or the Dep't of Enterprise, Trade and Industry isn't doing a good job promoting the benefit of super-fast speed. Maybe we should lend our speed demons to Northern Ireland to have them drum up some interest.

The demand for super-high speed broadband in the UK would seem to be held up by the same factor that holds it up in the US: People who use the Internet every day for commerce and all the rest of the applications don't see the need for “blazing fast downloads” just yet. Perhaps the answer is to build the application that needs them and then see what it does for demand.