U.S. Falls From Internet Elite, Aims to Catch Iceland, Hungary

Laurent Bernard, an intern at HSBC Holdings Plc in Paris, recalls his U.S. Internet experience in 2008, the year he moved to New York City as a student.

“I noticed right away that the Internet was slower,” Bernard, 24, said in an e-mail. “The most annoying thing was the time it took for each Web page to load on the screen. In France, it’s pretty much instantaneous.”

After ranking third in the world a decade ago, the U.S. has dropped to 15th in the proportion of citizens receiving fast Web service, or broadband, according to the Organization for Economic Cooperation and Development. South Korea, Iceland and Germany are among the countries that ranked higher in 2009, the Paris-based group says. Connections were both faster and cheaper in 12 countries, including Hungary and Denmark.

“We are not on the Olympic podium when it comes to broadband,” said Federal Communications Commission Chairman Julius Genachowski in an e-mail. “Other countries are not standing still and neither should we.”

The FCC under Genachowski is proposing to spend $16 billion in the next decade to close the gap. By boosting wireless service, shifting federal subsidies and encouraging investment, the FCC National Broadband Plan aims to give 100 million U.S. homes the same connection speeds available today in Portugal and Japan.

Photographer: Joshua Roberts/Bloomberg

Julius Genachowski, chairman of the U.S. Federal Communications Commission. Close

Julius Genachowski, chairman of the U.S. Federal Communications Commission.

Photographer: Joshua Roberts/Bloomberg

Julius Genachowski, chairman of the U.S. Federal Communications Commission.

Internet access has triggered policy debates worldwide. Delegates at a United Nations conference that continues through June 4 in Hyderabad, India, are discussing ways to increase Web use in the developing world, where home Internet availability is one-fifth that of rich nations.

Subsidies, Computers

While an FCC survey released yesterday found that 91 percent of U.S. consumers say they’re satisfied with the speed of their Internet service, that may be because they lack a base of comparison. The same survey of 3,005 adults showed that four out of five don’t know how fast their Web service is.

By some measures, the U.S. is lower than in the OECD survey. Speedtest.net, a Seattle-based service embraced by the FCC, last month found the U.S. ranked 29th of 178 countries in download speeds, behind Ukraine, Bulgaria and the Netherlands.

Countries that rank higher than the U.S. tend to be densely populated, use subsidies, and promote computer use, said Robert D. Atkinson, president of the Washington-based Information Technology and Innovation Foundation, which studies innovation policy.

“The U.S. is behind because we’re a big, spread-out country with lots of people who don’t own computers,” Atkinson said in an interview.

‘Intense Competition’

In France and elsewhere in Europe, “pretty intense competition” has led to lower prices, innovative services and fast connections, Taylor Reynolds, a Paris-based economist with the OECD, said in an interview.

European regulators require France Telecom SA and other companies to lease lines to competitors, Reynolds said. Seven providers vie over the single line into his home west of Paris, where Reynolds pays 30 euros a month, or about $37, for unlimited phone, 150 television channels and Internet downloads at 20 megabits a second.

In the U.S., where competitors lay their own lines to homes, the average broadband download speed is 4 megabits per second, according to the FCC. Comcast Corp., the largest U.S. cable operator, charges at least $130 for unlimited U.S. phone calls, more than 200 video channels and speeds of 12 megabits a second in its home market of Philadelphia.

‘Kicks Can’

The FCC in its National Broadband Plan issued March 16 doesn’t call for adopting Europe’s approach of forcing companies to share lines, an omission that “basically kicks the can down the road,” Yochai Benkler, a professor at Harvard Law School, said in an interview.

Advanced countries “almost universally” require line- sharing, according to a report Benkler compiled for the FCC.

AT&T Inc., Verizon Communications Inc. and Qwest Communications International Inc., the three largest U.S. phone companies, say the FCC’s been wise not to impose line-sharing.

FCC policy is a “resounding success” and preserves incentives for companies to invest in fast fiber lines, according to a Jan. 22 AT&T regulatory filing. In 2008, major providers invested about $26 billion in broadband, the company said.

OECD figures understate broadband penetration in the U.S., where households are larger than in Europe, James Cicconi, AT&T’s senior executive vice president for external and legislative affairs, said in an interview.

‘Bunch of Hooey’

“It’s a bunch of hooey,” Cicconi said of the notion the U.S. is behind in broadband.

If sources including the European Commission and the Pew Internet & American Life Project are considered, the U.S. rises seven to nine places for connections per household, to 10th or higher among 27 developed nations, AT&T said in a filing Nov. 16.

The U.S. may make up ground soon. Dallas-based AT&T, New York-based Verizon and cable companies probably will have fast lines passing 90 percent of homes by 2013, according to the FCC.

Advanced technology that provides faster mobile broadband is planned by Verizon Wireless, AT&T, Sprint Nextel Corp. and Clearwire Corp., according to the FCC.

“There’s this perception that somehow we’re terrible,” Michael Powell, a former FCC chairman, said in an interview. “We’re really just a few months behind.”

The world’s biggest Web-based companies have expanded globally using the U.S. Internet as a base, Powell said. “Luxembourg doesn’t have Google or Facebook or Microsoft,” he said.

To contact the reporters on this story: Todd Shields in Washington at tshields3@bloomberg.net; Matthew Campbell in Paris via mcampbell39@bloomberg.net.

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