A new ITIF report makes clear that comparisons between U.S. and European broadband prices are meaningless without accounting for the differences in necessary expenditures. The two markets are built on entirely different cost structures, including different deployment and operating costs.
ITIF’s analysis of operating profits shows that European broadband companies have an average profit higher than their U.S. peers. U.S. providers do not artificially raise prices and pocket the difference, as some have alleged, state the authors.
Other key takeaways from the study include:
- A longstanding narrative that U.S. broadband prices are exorbitantly higher than their European peers’ buttresses claims of European superiority and calls for similar unbundling requirements and regulated competition in the U.S telecom industry.
- However, U.S. broadband providers bear 53 percent higher costs than European providers pay for equivalent labor, capital investments in network infrastructure, spectrum licenses, advertising, and taxes minus subsidies.
- U.S. telecom workers’ wages are higher than those in Europe, while U.S. capital expenditures surpass EU infrastructure investments both overall and per household. Critics would be hard-pressed to argue for cost-cutting in these areas.
- On the other hand, European telecom companies are taxed at a lower rate than U.S. providers and receive more government subsidies. In every regard, U.S. providers must pour proportionately higher amounts into essential expenditures.
The authors conclude by saying:
Because the U.S. and European broadband industries are composed of markedly different labor markets, serve customers with different geographic makeups, are subject to differing taxes and subsidies, and must allocate different proportions of their revenues to various costs in order to stay competitive, to ignore these inherent differences in the two markets is to write a false story of the regulatory differences that have made one market “succeed” where the other has “failed.” And the real story is that…U.S. companies [have] not failed…[they’ve] consistently boasted high metrics of success and managed to sustain the new normal through a global pandemic…