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Why Does Internet Service Cost So Much?

Guest post by: Marvin Garellek

Article Overview: Why Does Internet Service Cost So Much?

Why Does Internet Service Cost So Much?

Back in the day my first communications bill from the telephone company was $12 a month. For that money I had a touch tone phone and line and my own number. When I moved to my own apartment of course I had to add cable television service and my monthly communications bill shot up to about $45 per month. Fast forward to today and my household bill runs about $330 a month! Ouch. Of course this includes landlines, HD satellite television, high speed Internet and four cell phones. Since we all have cell phones and we have high speed Internet, we are going to drop the landline phone (about $45 per month) in favour of an Internet telephone line otherwise known as Voice over Internet Protocol or VoIP.

So why is Internet so costly?

Let's look at the elements that make up an Internet connection:

• a computer;
• a modem;
• access to a telephone line, cable or satellite dish; and
• an Internet Service Provider (ISP).

The ISP requires very expensive equipment to deploy and provide Internet services. Not only is there the cost of the equipment, but the provider has to install it, maintain it, provision it, bill it, provide antivirus, firewalls and filter and a customer service department. All of these take human and physical resources and that cost big money.

Surely we all understand this, but how come us Quebecers pay so much compared to the rest of the world? To give you some perspective we pay on average $6.50 per mbps (megabit per second). In the US it is $3.33, Sweden $0.63 and Japan $0.27. The average speed we get in the US and Canada is 4.8mbps while Sweden gets 18.2mbps and Japan races at 61mpbs.

Source: OECD and ITIF Broadband Rankings.

Competition is usually what lowers prices in a free market. In Quebec, there is only DSL, Cable, Satellite and Rural Wireless providers. Prices remain high with prices for packages that have up to a minimum of 2mbps service with no contract at starting at $32 per month for DSL, $62 at one cable provider, $35 for the other cable provider and $59 for broadband wireless. Of course service levels vary between providers and that is what makes it difficult for consumers to decide on a provider.

It seems, at least, to this Internet customer that prices should be significantly lower and service providers would still keep operational finances in the black due to increased sales volume. Provincial and municipal policy should be to encourage low-cost Internet service. Internet is an essential service today, providing communications and distribution of information for all. It encourages and drives small business and creates a more level business playing field and opens access to new markets. It will, most importantly, smash the conception that Quebecers won't take advantage of Internet services, and encourage the creation of an information based society.

Internet must be available to all Quebecers and to do so, ISPs must do as much as possible to lower prices. The existing fare structure is unacceptable.

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Article Tags: broadband, business, business plan software, business plans, Internet, wireless



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