May 1, 2012

Internet Infrastructure

Why the United States struggles with inferior Internet speeds.

Internet speeds in the United States are nothing to brag about. South Korea, Romania, Bulgaria, Lithuania, Latvia and Ukraine all have significantly faster and cheaper Internet speeds than the United States.

Latvia? Bulgaria? Isn't that just a tad embarrassing for a country that likes to bill itself a superpower? Not for David Gewirtz, director of U.S. Strategic Perspective Institute and author of How to Save Jobs. For him, good enough is good enough.

“Steel manufacturers, for example, aren't shunting tons of HD video across oceans,” explains Gewirtz. “Instead, they're moving a lot of text, which doesn't require enormous speed. They're likely to be transmitting voice, which also works at U.S. broadband speeds. So, essentially, it's good enough to and from most countries.”

For many others, however, American broadband speeds are not just embarrassing, they are dangerously uncompetitive. “Broadband communications facilities are essential to 21st century advanced manufacturing in the United States,” says Peter Pratt, telecom sector industry analyst at San Francisco, California, consultancy PrattNetworks. Previously, he managed the Massachusetts state broadband program. “Primarily in the applications of computer-aided drafting, global supply chain management and sophisticated process control of the factory floor, broadband is key to keeping competitive.”

It is hardly helpful, then, that the U.S. broadband speeds are slow and getting slower due to Internet traffic congestion and heavier bandwidth demand from such things as online TV, videos, phone services, social media, cloud services and constant data access by mobile devices.

World Internet Speed Rankings

Based on 27 million downloads by 20 million computers in 224 countries from January through June 2011, the average worldwide download speed is 580 Kilobytes per second (KBps), determined a global Internet speed study by Pando Networks, a New York, New York-based Internet service company. The United States is only slightly ahead of the pack with an average speed of 616 KBps, but that means only “slightly above average” and not anywhere near the fastest competitors.

South Korea has the fastest Internet connections with an average speed of 2,202 KBps. Romania comes in second with an average speed of 1,909 KBps and Bulgaria comes in third with 1,611 KBps. Eastern European countries dominate the top 10 positions. Lithuania came in fourth at 1,462 KBps, Latvia in fifth at 1,377 KBps and Ukraine in eighth at 1,190 KBps. By comparison, the United States ranked 26th.

But raw speed is not the only consideration, especially for doing business, because fast doesn't matter if that quick connection is unreliable. Think of it this way: It doesn't matter if all your supply trucks can travel at the speed of light if only one out of 10 actually arrives. In Internet terms, the trucks would be digitalized packets, each containing 1,000 to 1,500 bytes of information and none containing the whole of anything sent. Byte is an abbreviation for “binary term,” a unit of storage capable of holding the equivalent of a single character, e.g. a single letter, punctuation mark or number that you see on the screen.

Every e-mail you send is broken into a series of packets, as is everything else you send or receive over the Internet. All these packets must arrive at the destination or the result is an unreadable file. But not all the packets of any given series have to travel the same route to arrive at the same computer. This means that all the packets that comprise that e-mail you just sent may or may not travel together but they must arrive at the same time and at the same place for the file to be readable. Packet transmission is done this way for the sake of efficiency because it allows networks to more effectively balance their loads, minimize congestion and prevent shutdowns or transmission failures. Packets can also be routed around equipment failures more easily.

This system works well enough most of the time. There are occasions when packets do get lost and files become unreadable even on the best Internet connections. The measure of reliability, then, is how often all packets arrive at their destinations at the same time. The Pando Networks study found the completion rates corresponded with the average speed rankings. South Korea again took first with a 94% completion rate. Most of the other countries with fast Internet connections were not far behind.

Connections Matter Too

While speed is slower in the United States, reliability is relatively high. But latency, which is the time it takes for one computer to acknowledge another before information is exchanged, is increasing. So this is contributing to slower speeds as well. This can be less a problem of Internet transmission speed and more a problem created by bottlenecks at various servers and routers. Still, the combination of increased latency and slow Internet connections can dramatically harm a company's ability to conduct business and retain key customers and partners.

According to the Network Weather Report, operated by the University of California in Los Angeles, the average latency for U.S. corporate websites is on the rise. These indices are important because differences in costs, speed and reliability can greatly affect how competitive a business can be in terms of operational costs, operational efficiencies, sales and customer service.

Location, Location, Location

That is not to say that the whole of the United States has a set Internet connection speed. No country does, which is why the Pando Networks study deals with averages rather than one specific speed. These variances are caused by a number of things including the quality of connections offered by individual Internet Service Providers (ISPs), overall and episodic traffic, and the state of the infrastructure found in specific parts of the country.

Mark Rogers, director of IT for Kolder, an international beverage cooler manufacturer in Edinburg, Texas, had such a problem: “Previously, our mission-critical infrastructure was housed internally in a rural location outside of Dallas. This resulted in repeated loss of connectivity and downed network due to bad weather, as well as poor bandwidth that could not reliably support our applications.”

While Kolder decided to address the problem by moving its data center to a facility that offered far better Internet connections and services, other manufacturers may move an entire facility or plan new facilities in geographic areas based on the availability of improved Internet services. This can affect metal service centers in three ways:

The need for increased Internet speed and reliability may change facility locations or planning for new locations.

Important vendors may move to gain advantages in Internet connectivity, which can affect delivery time and costs to the center.

Valued customers may move, which can also affect the metal service center's ability to compete and increase its delivery times and costs.

In the United States, the fastest and most reliable Internet connections are found in Andover, Massachusetts, where the average downloading speed is 22.41 Mbps. Andover was the only U.S. city to hit the top 10 fastest Internet cities in the world in the Pando Networks study, but it's still crawling compared to Seocho, South Korea's blazing-fast 33.5 Mbps, which put it in the No. 1 spot. (To learn how states' download speeds stack up against each other, see “Where We're Fast and Slow” above.)

Pando also measured the Internet speeds of 18,017 American ISPs. The fastest proved to be Verizon Internet Services followed by Comcast. Even so, these two ISPs are five times slower than Dacom Corp in South Korea. “Broadband may well be partially responsible for outsourcing much of the work we have, because broadband collapses distances, making Shenzen just a few hundred milliseconds away from Texarkana,” says Gewirtz.

“There are some issues with U.S. manufacturers who have factories out in the sticks, and they will definitely need to have reasonable broadband speeds to remain connected to the rest of the U.S., but broadband isn't what's keeping manufacturing outside the U.S.,” he adds. It certainly is not what may be attracting business to China, for example. The People's Republic, home of the world's largest population of Internet users, posted a dismal 1.96 Mbps, compared to the United States' 4.93 Mbps.

Nonetheless, Gewirtz's point that broadband collapses distances cannot be overstated. If metal service centers are to compete in servicing customers overseas, then fast Internet connections can be important in leveling the field.

Internet speeds in Canada are also proving to be an obstacle to business. Akamai, a global provider of cloud-based services, found in a global Internet speed test that Canada fell from ninth to 14th in the last six months. One year ago, Canada was in a four-way tie with the U.S., Taiwan and Sweden for fifth place. Now it's tied with Hungary and edging lower still. The average download speed in Canada jumped from 5.0 Mbps to 5.9 Mbps at the end of 2011, but that jump was not enough to keep it competitive with other countries that increased speeds at a more dramatic rate.

Most observers believe that the lack of competition accounts for the sluggish improvement in Canada. That belief drove the Canadian Radio-television and Telecommunications Commission (CRTC) to take steps to ensure greater competition by aiding the advancement of independent Internet Service Providers (ISPs) to work on top of the networks owned by giant firms.

So far the results have been mixed, primarily because of pricing problems and the giant ISPs' practice of capping independent ISPs usage and throttling users to keep traffic down. Recent consumer pressure is discouraging the practice of throttling (delaying Internet transmissions, deliberately slowing Internet speeds, and bottlenecking Internet traffic to slow demand in peak periods), but the practice does still exist.

Internet Speeds are Often Not as Advertised

Complicating the issue for manufacturers in the United States, the United Kingdom and other developed nations with slow connectivity is that ISPs often fail to deliver the speeds they promise. And, of those that do deliver as advertised, few deliver that speed consistently.

In a 2010 broadband performance technical report by the Federal Communications Commission (FCC), the government agency found that “average (mean) actual speed consumers received was approximately 4 Mbps, while the median actual speed was roughly 3 Mbps in 2009. Therefore actual download speeds experienced by U.S. consumers lag advertised speeds by roughly 50%.” The FCC found that the gap was similar across technologies (cable, DSL and satellite). “This gap may cause confusion among consumers, as actual speeds, which largely determine the end-user experience, lag advertised speeds considerably,” concluded the report writers.

A 2011 follow-up report, Measuring Broadband America: A Report on Consumer Wireline Broadband Performance in the U.S. by the FCC, found that gap to be smaller than previously thought, but it has not been closed. The study says: “On average, during peak periods DSL-based services delivered download speeds that were 82% of advertised speeds, cable-based services delivered 93% of advertised speeds, and fiber-to-the-home services delivered 114% of advertised speeds. Peak period speeds decreased from 24-hour average speeds by 0.4% for fiber-to-the-home services, 5.5% for DSL-based services, and 7.3% for cable-based services.”

As for connectivity, the report also found: “Latency [the speed at which one computer acknowledges another before beginning a transmission] was lowest in fiber-to-the-home services, and this finding was true across all fiber-to-the-home speed tiers. Fiber-to-the-home services provided 17 milliseconds (ms) round-trip latency on average, while cable-based services averaged 28 ms, and DSL-based services averaged 44 ms.”

Although the report is geared toward consumer usage, many small businesses use consumer-grade Internet connections, making the findings appropriate for their use, too. Other businesses use business-grade Internet connections but may find similar results in speed, reliability and latency.

In its continued quest to inform businesses and consumers about what speeds they are actually getting for their money, the FCC has provided a free means to check your Internet speed at www.broadband.gov/qualitytest (see further options in “Get a free Internet speed test”). This is an important quality control tool for businesses that are already over-paying for Internet connectivity (compared with faster Internet connections at lower costs in other countries) and seek to ensure delivery meets the ordered specs as they would with any other vendor.

Mobile broadband speeds in the United States are also floundering. Most serious among mobile speed problems is an infrastructure gap in large portions of the western half of the United States, as shown on a map recently released by the FCC. “As our new map demonstrates, millions of Americans still live, work and travel in areas where advanced mobile networks have not been built out,” FCC Chairman Julius Genachowski said in a statement. “Through the FCC's Connect America Fund, we're helping complete our nation's wired and wireless infrastructure.” Meanwhile, millions of Americans are getting less than 3G mobile broadband speeds in these areas. Likewise the highly publicized 4G speeds that some carriers advertise heavily are reportedly below international standards and delivered inconsistently.

The FCC's National Broadband Plan

The U.S. government says it considers broadband as important to the nation's infrastructure and its commerce as railways and highways. Accordingly, the FCC has put forth a National Broadband Plan (NBP) to increase both wired and wireless broadband coverage in the United States and to make it more affordable to consumers and businesses alike. So far, Congress has allocated $7.2 billion to expand high-speed Internet service in areas with limited or no services. Future funding is uncertain.

While helpful tools and studies like those cited above have come from this effort, there is still work to be done, and critics are not happy with the overall progress so far.

“While the National Broadband Plan was a sizable document, it contained very little in the way of substantive proposals,” says George Ford, chief economist at the Phoenix Center for Advanced Legal and Economic Public Policy Studies.

In Ford's opinion, the plan contains only two meaningful policy recommendations: 1) a significant increase in the amount of spectrum available for commercial broadband use and 2) a reform of the subsidy schemes used to expand the availability and adoption of communications services. While there has been much discussion over the spectrum recommendations, little has translated into action thus far. The effort is also focused more heavily on consumers than businesses, which Ford says may make sense but also limits the plan's overall impact.

“As I read it, the NBP had no proposals for addressing the needs of America's manufacturers, other than what it says about mobile broadband services,” Ford says.

The mobile aspect of the National Broadband Plan primarily pertains to increasing capacity in urban areas and range in rural areas, and to expediting action on data roaming to achieve wide, seamless and cost competitive coverage.

“The plan largely focuses on consumer issues,” Ford says. “Availability to consumers may help some manufacturers, but only as a byproduct of geographic diversity.”

Even so, Ford says the focus on consumers is probably sensible. “For the most part, if a quality Internet connection is important enough to a business, then it can find a suitable location in the U.S. In fact, there are many suitable locations. There is no shortage of broadband for business in this country.”

He adds, “A lack of connectivity at legacy locations may be problematic, but business must adjust to the changing business climate, and resolving that issue may not have much effect on economic output in the U.S., since what is lost at one location can be picked up at another.”

But it may be a mistake to assume that just moving facilities to better connected places in the United States is a simple answer to remaining competitive in an increasingly faster Internet world. “The disparities we found were striking. While, in general, developed economies outpaced the developing world in average download speeds, big names such as the U.S., U.K., France, China and Canada were not even close to being the fastest. Instead, we saw high speeds in markets such as Eastern Europe where focus on infrastructural development and favorable geography promote a higher level of connectivity,” says Robert Levitan, CEO of Pando Networks.

You can bet that Eastern Europe and Asia are not going to the trouble and expense to out clock the Western world's Internet speeds without reason.

Pam Baker has written hundreds of articles in leading technology, business and finance publications. She has also authored several analytical studies on technology, eight books and an award-winning documentary on paper-making.