Europe Promises More Than It Delivers

The long-awaited SamKnows study of European broadband speeds and promises is out, and it confirms what we suspected: broadband subscribers in Europe do not get the performance they pay for. SamKnows first uncovered a major discrepancy between advertised and actual speed in the UK, and has now published a study of the 27 EU countries plus Norway, Iceland, and Croatia that confirms the problem is endemic to the entire continent:

It’s been long known that advertised broadband speeds rarely match up to the reality, but it turns out the disparity across Europe is in the region of 25 percent.

Consumers across the continent get on average three-quarters of the “up to” headline broadband speed advertised by their ISP, according to figures released on Wednesday by the European Commission. The EC survey involved more than 9,000 users in the 27 EU member states, as well as Croatia, Iceland and Norway, in March last year.

Surprisingly, UK advertised broadband speeds are no closer to reality than they've ever been; SamKnows says that xDSL users in the UK get 44.7% of advertised speed during peak hours, worse than economically-challenged Greece but better than France’s 40.4% (see chart, page 84.)

If ISPs in the US were making claims as wild as the ones that those in France and the UK make, our public interest broadband dissidents would be up in arms. As it is, they're saying things like this:

But Dave Burstein, editor of the industry blog DSLPrime, said the [Comcast and Verizon] executives are distorting the true picture by citing statistics that compare the U.S. to the average of all European countries. Burstein said a more accurate comparison should look at the U.S. in relation to individual countries like France and England.

OK, now that SamKnows has done what he’s asked and found France and the UK sorely lacking, what’s Burstein’s comeback going to be? My guess is he'll seek to change the subject. One zig-zag might go toward prices, a complex subject that’s easy to fudge. New America Foundation’s “Open Technology Institute” is first out of the blocks on the price front, with a study that combines broadband with pay TV to reach the unsurprising conclusion that European television programming is cheaper than American programming is. Of course, the same conclusion can be drawn about the ticket prices to European movies and sporting events, as they're less costly to produce. The combination of pay TV and broadband prices tells us very little about broadband.

Price is also confusing when we leave out subsidies and the actual costs of providing a service. The ITIF Whole Picture report found that UK’s broadband companies have net profits in excess of 21%, France’s enjoy margins of 7%, while America’s scrape by at 2%.  This is simply a function of the high cost and ongoing investment the US firms make in broadband and the tendency to extract more profit by investing less heavily in Europe.

The SamKnows study is ostensibly all about speed, however. The overall objective is to compare advertised to actual speeds, which it does by technology: SamKnows separates broadband service into xDSL, cable, and fiber, but it considers VDSL a form of fiber rather than xDSL. That would put AT&T U-verse into the fiber category.

VDSL typically tops out at 25 Mbps for AT&T’s single pair system and 40 Mbps for Century Link’s pair bonded system, which is plenty fast for must purposes but not as fast as FTTH systems such as Verizon FiOS.

So the study compares speeds in the 30 European nations to each other by technology, then averages them, and compares the master average to the US average by technology, concluding that speeds are higher in Europe:

Whilst [advertised vs. actual speed in Europe] compares poorly to the USA’s average of 96% of advertised download speed, it is imperative to note that the actual download speeds attained in Europe were considerably higher than those in the USA. xDSL services averaged 7.20Mbps in Europe and 5.30Mbps in the US. Cable services averaged 33.10Mbps in Europe and 17.00Mbps in the US. The same pattern was found for FTTx services too, with Europe averaging 41.02Mbps and US achieving 30.20Mbps.

This is an interesting conclusion since it apparently conflicts with other data sets, such as Akamai. Part of that is because Akamai measures all IP connections - for businesses and schools as well as homes - but SamKnows only cares about the home, the place that has the least impact on innovation and the economy. That’s part of the question of sampling, but there’s much more.

If we take the SamKnows numbers at face value, the conclusion that European broadband is faster than American broadband doesn't follow. This is probably counter-intuitive. If there are three choices, A, B, and C, in both places, and all three are faster in Europe, doesn't that mean that Europe must be faster?

Well, no, actually. If all three choices had equal use it would, but that’s not the way things are. xDSL is by far the slowest option, but it represents the overwhelming majority of connections in the EU, more than 70%. US cable and FTTx may be slower than the EU’s cable and FTTx, but we use three times as much of each as Europe does, so our xDSL share would be less than 30% the way SamKnows defines it.)

The higher speeds the US reaches in technology-neutral national measurements such as Akamai reflect the greater use of cable and fiber in the US compared to Europe. So the US consumer experiences higher speeds on average then the European consumer because the normal European connection is DSL and the normal American connection is the much faster cable. The US also has much more fiber than Europe does.

Regardless, I can predict right now that some blogger will conclude that the SamKnows EU study probes that Europe’s broadband is faster than America’s. I'll update the post with a link when I see it. (UPDATE: Right on cue, the Wall Street Journal falls into the trap: "While European consumers are getting faster services than U.S. consumers...)

SamKnows could aggregate the three scores for each country to a country-wide, technology-neutral average, but the result would be highly dependent on their sampling technique. The beauty of the Akamai data is the breadth of its sample: half the people who use the Internet hit an Akamai server sooner or later, but SamKnows measured less than 10,000 Europeans.

The cable numbers SamKnows reports from Europe are intriguing, however. I would expect that the average speed for DSL in the US would be lower than it is for Europe because of the long copper loop/low population density factor discussed in the Whole Picture report. I would also expect the fiber numbers to be a bit random in Europe because there’s very little fiber deployed, but where it is found there tends to be a cable competitor with pretty high speeds already, as in Amsterdam, London, and Stockholm. There’s also an advantage in being the last to install fiber, as the parts get faster and cheaper.

But cable is relatively immune from distance effects (better than DSL, worse than fiber) and determined by standard technologies that are the same in the US as in Europe. So why would the same technology - DOCSIS - run at 33.10Mbps in Europe and 17.00Mbps in the US?

Before we try to guess, let’s recognize that we don't actually know what these numbers represent. SamKnows has measured broadband speeds in the US for the FCC, but the report on these measurements doesn't show a nationwide average speed, by technology or otherwise, it simply shows the honesty value for each offering. So at first blush, we would have to conclude that cable speeds in the US and Europe probably reflect several things:

1. The service tiers that users are choosing, obviously; and:
2. The affluence or speed-craziness of the cable customer; and:
3. What’s available for purchase

The speeds SamKnows shows for the US and Europe are achievable by DOCSIS 2 (which goes up to 40 Mbs), so there’s no real technology question afoot here.

I suspect it comes down to the fact that cable is perceived in Europe as an elite service that’s only of interest to a small, hardcore group of people who are willing to pay a lot for a service that’s four times faster than DSL, while cable users in the US are a more diverse group spanning the range from the cost-conscious to those who simply want that 100 Mbps connection and don't care about the price. The data are also from April and May 2012, and we know there’s been some upward movement since then as well, but probably not all that much.

So what can we conclude from the latest SamKnows study? Three things:

1. There’s a huge gap between advertised speeds and real ones in Europe but not in America.
2. Faster broadband technologies are more widespread in the US than in Europe (this isn't in the study, but we know it from Akamai and the OECD deployment data.)
3. Europe is rather desperate to have us believe that European users expereience faster speeds than Americans do when in fact they don't.

It’s an interesting study, but its validity is limited to understanding the relationship of claimed performance to actual performance at each tier of service by each technology.