Frederic Lardinois -- writing for ReadWriteWeb -- calls attention to the decline in U.S. average Internet connection speeds as reported in Akamai's latest State of The Internet report. The U.S. ranks first in the number of unique IP addresses active during the period and fifth in the number of per capita unique IP addresses active during the period, but barely makes the top twenty in a list of average connection speeds by country. In other words, the U.S. leads in demand for Internet services and trails in the supply (i.e., speeds at which those services are delivered). This revelation should not surprise anybody.
Take a moment and think back to whatever introductory Economics course you may have taken at university. Do you recall the Supply and Demand curves? What happens to price when demand is high and supply is low? That's right: the price is high. For suppliers wanting to maximize revenue this is the preferable outcome. This is why an "up to" 15mbps asymmetric Internet connect in Seattle (if you can get it) will cost you ~US$42.95/month when a 100mbps symmetric Internet connection in Hong Kong will cost you ~US$13/month. What would a 100mbps symmetric Internet connection cost you in Seattle? Good luck finding one -- in all practical terms, they don't exist. Supply is constrained on purpose to maximize "rents" to the producer.
"What happened to market equilibrium", you ask, "Aren't market forces suppose to equalize supply and demand, thereby minimizing rents?"
First, we don't actually know what point on a set of Internet bandwidth supply and demand curves represents equilibrium. (For all we know, Hong Kong could be over-supplying bandwidth -- also known as creating a "surplus".) Second, market equilibrium is only possible when competition exists in a market. Broadband Internet service is a natural monopoly. Monopolies always result in higher prices. Third, who says that market equilibrium should be a goal for broadband Internet? Would we apply the same goal to basic education, water, telecommunications, or roads? We haven't in the past, and for good reason.
Again, nobody should be surprised by this Country's taking of 18th place in a ranking of average Internet speeds. Our fetishistic fixation on free market solutions has fostered market failure after market failure in those cases where free market solutions were obviously inappropriate (e.g., natural monopolies). Need I bring up Enron? How about Health Care? Last-mile Internet service is no different. It's time that we accept the fact that the free market won't solve the bandwidth divide.
Since the release of Seattle's Broadband and Telecommunications Task Force's report, many people involved in the effort have sincerely wished for a private enterprise answer. Realizing that no private enterprise was interested in building out a fiber to the home (FTTH) network in Seattle, many of the same people sincerely thought a public-private partnership would be possible. You could almost hear crickets chirp in response. (Nobody was interested unless the public-private partnership meant that the City would be putting up the money.) The fact is that it's in the best interest of Seattle's Citizens to build their own FTTH network. It's really no different from the world-class city-owned electricity, water, and parks that Seattleites enjoy so much.