Global Economics

In the Broadband Race, the U.S. Is Way Behind


Even some tiny ex-Soviet states have speedier service than the U.S., which comes in at No. 16, a study shows

Anyone who's ever suffered from an online video timing-out on YouTube knows that broadband speed is important. And it's going to get even more important, as a new generation of Web applications comes on the market. But the quality of broadband service varies widely around the world—and some tiny countries such as Latvia and Slovenia are well ahead of the U.S.

Those are among the findings of a study released on Sept. 12 by the University of Oxford's Said Business School and Spain's Universidad de Oviedo. Researchers ranked 42 countries on broadband quality, awarding each country a score based on Internet upload and download speeds, as well as how long it takes online data to reach a computer.

So who comes out on top? Not surprisingly, tech-savvy Japan made the highest score, and Korea was No. 5. The rest of the top 10 countries were European, including not only Germany, Scandinavian nations, and Switzerland but also the former Soviet states of Latvia and Lithuania, as well as Slovenia in the Balkans. The U.S. came in only 16th.

Quality, Not Quantity

True, the U.S. has a higher rate of broadband penetration than some of these smaller countries. But especially for businesses, simply getting access to broadband isn't enough.

The quality of broadband services will play an ever greater role in productivity, says Fernando Gil de Bernabé, a managing director in the Internet Business Solutions Group at Cisco Systems (CSCO), which sponsored the study.

Companies need fast Internet connections to take advantage of more-complex applications, such as high-definition video-conferencing. Otherwise, they risk losing out to more technologically adept competitors. "The quality of a country's broadband directly links to its productivity and drives the domestic knowledge-based economy. It's as simple as that," Gil de Bernabé says.

Over the next three years, the researchers reckon, an Internet download rate of 11.25 Mbps—compared with the current benchmark of 3.75 Mbps—will be necessary to run the next generation of Web applications. That includes file-sharing and teleconferencing programs, as well as streaming high-quality TV onto computer screens and televisions. Currently only Japan has the infrastructure in place to meet these demands.

Expensive Upgrades Needed

For others to catch up, Gil de Bernabé says companies and governments must make multibillion-dollar investments to upgrade outdated equipment. That's easier said than done. According to Britain's Broadband Stakeholder Group, an industry body, it would cost $50 billion to connect every British household to an ultrafast, fiber-optic broadband network. To date, companies have balked at forking out the cash, while governments have often dragged their feet on providing help.

This delay may come back to haunt Western countries as emerging economies such as China and India look to beef up their broadband offering. Already outflanked by these countries in manufacturing industries, the U.S. and others have little choice but to invest in broadband to maintain their edge.

Scott is a reporter in BusinessWeek's London bureau .

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