Population density in Hong Kong helps its broadband companies reach users at low cost.
Hong Kong residents can enjoy astoundingly fast broadband at an astoundingly low price. It became available last year, when a scrappy company called Hong Kong Broadband Network introduced a new option for its fiber-to-the-home service: a speed of 1,000 megabits a second — known as a “gig” — for less than $26 a month.
In the United States, we don’t have anything close to that. But we could. And we should.
Verizon, the nation’s leading provider of fiber-to-the-home service, doesn’t offer a gig, or even half that speed. Instead, it markets a “fastest” service that is only 50 megabits a second for downloading and 20 megabits a second for uploading. It costs $144.99 a month. That’s one-twentieth the speed of Hong Kong Broadband’s service for downloading, for more than five times the price.
One thing working in Hong Kong’s favor, of course, is its greater population density, enabling broadband companies to reach multiuser dwellings at a much lower cost. But density is only part of the explanation. The personality of Hong Kong Broadband should be noted, too. A wholly owned subsidiary of City Telecom, it is an aggressive newcomer. It was willing to suffer seven years of losses while building out its fiber network before it turned profitable.
Hong Kong Broadband’s principal competitor is an older company, PCCW, which has several other lines of business, including phone, television and mobile. PCCW also offers gigabit service to the home and benefits from the same population density. But PCCW’s price is more than twice as much as Hong Kong Broadband’s. Despite its low prices, Hong Kong Broadband now operates in the black.
Inexpensive pricing of gigabit broadband is practical in American cities, too. “This is an eminently replicable model,” says Benoit Felten, a co-founder of Diffraction Analysis, a consulting business based in Paris. “But not by someone who already owns a network — unless they’re willing to scrap the network.”
In the United States, costs would come down if several companies shared the financial burden of putting fiber into the ground and then competed on the basis of services built on top of the shared assets. That would bring multiple competitors into the picture, pushing down prices. But it would also require regulatory changes that the Federal Communications Commission has yet to show an appetite for.
Dane Jasper, the chief executive of Sonic.net, an Internet provider based in Santa Rosa, Calif., says that most broadband markets in the United States today are dominated by one phone company and one cable company.
“Why doesn’t Verizon offer gigabit service?” Mr. Jasper asks. “Because it doesn’t have to.”
In its earnings report for the quarter ended Dec. 31, Verizon said its fiber-based Internet service, which serves 12 states and the District of Columbia, was available to 12.8 million premises, an increase of 10 percent from the previous year.
When I asked about its lack of gig service, C. Lincoln Hoewing, Verizon’s assistant vice president for Internet and technology issues, said, “We already offer 150 megabits,” referring to a tier of fiber-based service that is marketed for $195 a month to small businesses in many of its markets. It “seems to be satisfying demand,” he said.
In a follow-up e-mail, a Verizon spokeswoman addressed the company’s lack of a gig service by saying that it offers “speeds that exceed what customers can and do use.”
As long as a gig is expensive, a lack of customer interest shouldn’t be surprising. In October, EPB, the municipal electric utility in Chattanooga, Tenn., introduced a gig option in its fiber-to-the-home Internet services. A spokeswoman said the option, which costs $349.99 a month, currently has only about 20 customers.
It is true that residential customers would now be hard-pressed to fully use anything close to a gig. Uncompressed, broadcast-quality HD video, for example, uses 23 megabits a second.
But it is possible to imagine situations — a doctor’s office consultation, say, involving specialists scattered around the country, poring over the patient and her cerebral angiogram simultaneously — where multiple, two-way video feeds could chew up a lot of bandwidth. All parties would need the ultrafast connections. But that level of capacity seems distant because each party needed to make it happen — customers, software developers and Internet providers — is waiting for the others to show up first.
Google doesn’t want to wait. It and Sonic.net are preparing an experimental deployment of gigabit service to 850 faculty and staff homes in a Stanford University subdivision.
Separately, Google plans to select one or several cities where it will offer gigabit service at what it calls “a competitive price” to at least 50,000, and potentially 500,000, people. In a post on the company blog titled “Think Big With a Gig,” it says, “We want to see what developers and users can do with ultra-high speeds, whether it’s creating new bandwidth-intensive ‘killer apps’ and services, or other uses we can’t yet imagine.”
Mr. Jasper of Sonic.net says the history of computing shows us that “no matter how much storage we have or how fast the computing processing speed or network connection speed, applications arise to utilize them.”
While companies like Verizon don’t seem to be in a rush, that little Hong Kong business is saying: A gig? Sure. Join this grand experiment early. At $26 a month, it’s a low-cost ticket to the future.
Via New York Times