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Majority of US ISPs offer lower-speed service

December 19, 2014

Research from the Economics and Statistics Administration (ESA) of the US Department of Commerce – Competition Among U.S. Broadband Service Providers – has found that more service providers offer lower-speed than higher-speed service.

Noting that more than one quarter of American homes have not adopted Internet service, with many citing cost as their primary reason and that market competition can significantly affect consumer prices, the ESA set out to ask: how many Internet service providers (ISPs) are available to consumers at different levels of download speeds?

Looking at Internet service options available to households in December 2013, using data from the Census Bureau and National Telecommunications and Information Administration, the ESA finds that more service providers offer lower-speed than higher-speed service. At download speeds of 3 megabits per second (Mbps), which is the Federal Communications Commission’s current approximate standard for basic broadband service, 98 per cent of the population had a choice of at least two mobile ISPs and 88 per cent had two or more fixed ISPs available to them.

However, as multiple household members increasingly consume video streaming services music streaming, and online games, the adequate broadband speed bar has been raised. To understand just how slow 3 Mbps is, it takes about 2.25 hours to download a 6 gigabyte movie. The same movie would only take 16 minutes to download at 25 Mbps.

At somewhat higher speeds, such as 10 Mbps, the typical person still is able to choose among two fixed ISPs. The typical person also has the option of choosing among three mobile ISPs. At even higher speeds, however, the number of providers drops off dramatically. For example, only 37 per cent of the population had a choice of two or more providers at speeds of 25 Mbps or greater; only 9 per cent had three or more choices. Moreover, four out of ten Americans did not live where very-high-speed broadband service – 100 Mbps or greater – is available. Of those with access to broadband at this speed level, only 8 per cent had access to two or more providers; 1 per cent had access to three or more. Only 3 per cent of the population had 1 Gbps or greater available; none had two or more ISPs at that speed.

The report examines both fixed and mobile ISPs. The ESA separated its analysis of these two types of Internet access because some groups consider them to be imperfect substitutes, especially for higher-bandwidth applications. Mobile ISPs typically charge high fees if consumers exceed data usage limits. Furthermore, the service is less reliable, companies have not fully deployed newer generation technologies with higher download speeds and reduced latency, and mobile service is virtually non-existent at download speeds of 25 Mbps or greater.

In summary, the report finds that the number of ISPs from which consumers can choose varies by speed; there are multiple providers of lower speed broadband but this number dwindles at higher speeds. All else equal, having fewer competitors at a given speed is likely to drive up prices. As a result, some consumers will decide not to adopt Internet access at all, some will choose a slower speed that otherwise, and some will economise in other ways.

Categories: Articles, Broadband, ISP, Markets, Research