Cheap, ultrafast broadband? Hong Kong has it

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 sustain 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 U.S. 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.