The most expensive internet in America: fighting to bring affordable broadband to American Samoa

That's New York City Mayor Michael Bloomberg, speaking candidly during a recent interview at D10 in California. The topic of conversation? Widespread WiFi, and whether or not the government should be the one thinking about its future ubiquity. More specifically, if WiFi hotspots should be treated like "roads or water supply," as aptly stated by AllThingsD's Kara Swisher.

This obviously isn't the first time such an idea has crossed the minds of those connected to Washington, D.C. Muni-Fi (municipal wireless networks) projects were all the rage a few years back, but one spectacular failure after another swiftly extinguished that momentum. In more modern times, America (as well as other nations) has sought to solve the "rural broadband" problem, bringing high(er)-speed internet connections to places with a higher bovine population than human.

But bringing broadband to places like rural North Dakota seems like an easy chore to a small, but passionate, group of 60,000 sitting some 4,770 miles from San Diego, California. American Samoa may be an unincorporated US territory located closer to pure bliss than the hustle and bustle of Wall Street, but it's no doubt being taken into consideration in recent mapping projects aiming to pinpoint the areas most lacking in terms of digital infrastructure. Unbeknownst to most mainlanders, this fragile island chain is home to the most expensive internet in America, and the political issues surrounding it are astonishing. Head on past the break to learn more on what I discovered.

I recently traveled to Pago Pago, with unlocked smartphone in hand, after a brief (and stunningly beautiful) flight from neighboring Samoa. [For more on my time there, feel free to dive into this report.] At the time, I was floored at how modern the digital infrastructure felt. I checked into a hotel with gratis broadband internet in every room, and within 20 minutes, I had a Bluesky SIM card in my Galaxy S II sucking down HSPA+ at (comparatively) affordable rates. It was around $25 for half-a-gig of data, with no peak-use limitations as I saw in Samoa.

As it turns out, however, full-time residents have a much tougher time securing fast, reliable access. A source connected to the American Samoa government, who requested to remain unnamed due to the sensitivity of the subject, was kind enough to answer a wealth of questions on the matter, as was One Economy's Daniel Calarco. For those unaware, Calarco's organization is mapping the broadband infrastructure and creating a report about barriers to internet adoption in American Samoa for the US Department of Commerce. Before diving in too deep, it's important to get a better understanding of the island group itself. Home to fewer than 60,000 residents total, there are only two flights per week to Honolulu, and outside of daily flights to neighboring Samoa (APW), there really aren't any other options for access -- for common tourists, anyway. Put simply, this place is remote. Not Pitcairn Island remote, but remote nonetheless. %Gallery-157790%

There's a huge amount of importance placed on family across the island, and a major swath of residents are employed at the StarKist tuna plant in central Pago. The culture, goals, economic expectations and world view of residents are drastically different than that of most mainlanders. As an example of how tightly knit this place is, an entire memorial (the Leone Memorial Garden) was erected to immortalize the memory of 11 people who were killed in Leone in the catastrophic 2009 tsunami.

That said, it's a progressive place. Many of its youth aren't satisfied with keeping an island mindset -- they aren't eager to reject their culture, mind you, but they're visibly hungry to learn more about the outside world. The PacRimEast cable, originally laid in 1993, was one-upped in 2009 by an ASH undersea cable that increased bandwidth from 20Mbps to 1Gbps. But in reality, consumers aren't seeing a huge improvement in what's offered. At the aforementioned source's home, they pay $75 per month for a wireless Motorola Canopy-based system that provides 256Kbps down and 256Kbps up. Thankfully, there's no usage cap on that. If it were available, they'd be able to opt for a cable service that provides 1.5Mbps down and 512Kbps up, but that costs $150 per month and has a 25GB monthly cap.

My source aptly points out that the AS government and Bluesky Communications received a $10 million loan to redeploy the PacRimEast cable between Hawaii, American Samoa and Samoa, and it seems that it's trying to recoup those costs by charging an exceedingly small population an exceedingly large amount per month. A $10 million hit to the population of Seattle would be paid back in no time; but with fewer than 3,000 American Samoa households purchasing broadband on a monthly basis, it'll take a proverbial eternity to see repayment.

No doubt, those rates would probably make the average mainlander balk, but have a think on this: since American Samoa has a GDP per capita of roughly $8,000 and an unemployment rate near 30 percent, high-speed internet is simply out of reach for the vast majority of Samoans. Further leaning on One Economy's findings, the average measured download speed is 66Kbps (just 7 percent of the FCC's minimum standard for broadband) in American Samoa. Even looking at Guam, the US Virgin Islands and the Northern Mariana Islands, American Samoa has the highest calculated cost of internet in all of America -- by a long shot. To help add even more perspective to the matter, I spent a bit of extra time interviewing One Economy's Daniel Calarco. Our conversation can be seen in full below, followed by his organization's initial report on the matter.

Interviewing One Economy's Daniel Calarco

Could you explain a bit about your job, why it was created, and what your personal and professional goals are?

Calarco: "My job as director of international programs is to oversee our work outside the mainland US to help low-income people improve their lives via information technology. This includes oversight of projects in the Americas, the Middle East, Africa, and South Asia, but the three projects in the Pacific are ones that I work the most on right now. These are projects that aim to create a national broadband map. The US Department of Commerce issued RFPs (requests for proposals) for each state and territory to create their portion of the map. Most states had a large state entity like a public utilities commission or a state university carry this out. Since there is no equivalent agency in the small territories, One Economy bid on and won these contracts as part of a consortium of partners.

Personally and professionally, I would like to see people around the world get access to affordable computers and internet. I think there is a lot we take for granted in America, not the least of which is our access to information. When I have a question about something like health, finance or education, I can find the answer easily online. People around the world face so many barriers, whether it is reliable electricity, access to a computer, affordable internet, or even content online in their local language (you would be amazed at how little content there is online in languages besides English and romance languages). I want to help break down these barriers so that everyone can have access to the same wealth of information we have here in the US."

Is home-based "broadband" available all across Tutuila (American Samoa's main island)? What about availability across the Manuʻa Islands (sparsely populated gems some 70 miles east of Tutuila), including Ofu-Olosega?

Calarco: "It's probably better to show you than tell you about it. We have created a public web portal that displays maps of broadband in AS here.

If you click on the coverage tab, you can see exactly where there is and isn't broadband according to the ISPs. We're working to incorporate community feedback via town halls since much of the rationale for the map is to ensure that what the providers are telling us is accurate. About 8 percent of residents of American Samoa report that they cannot subscribe to broadband because it is not available in their area."

How many companies offer home-based broadband across American Samoa?

Calarco: "Two -- Bluesky and ASTCA (American Samoa Telecommunications Company)."

Do you know if similar rural broadband initiatives exist for other outlying US territories, such as Guam and the US Virgin Islands?

Calarco: "Schools in all the territories qualify for the e-rate program for lower cost connectivity.

The federal government has sponsored several programs under the Broadband Technology Opportunity Program, of which One Economy has received funds to expand rural broadband access."

Does the government currently subsidize the cost of home-based broadband for American Samoans? Is that a consideration? What are your personal feelings either way on that?

Calarco: "Not as far as I know. ASTCA is still kind of a quasi-governmental organization even though they are technically privatized. If they are operating at a loss, then one could say that they are subsidizing internet at home, but I don't know enough about their financials. My opinion is that the reason why costs are so high have to do with what's called 'middle-mile connectivity.' The only undersea cable connecting American Samoa links American Samoa to Hawaii (called the ASH Cable). It was privately funded by Bluesky (with the AS Government also footing part of the bill) and as a result, they are trying to make back the millions they invested. However, with fewer than 10,000 households in American Samoa, the numbers just aren't there for sufficient economies of scale for a privately funded cable. In my opinion, the federal government should buy out Bluesky's share of the ASH cable and take over the cable. The cable will never make back the money invested."

Do you think tech companies like Google would invest in internet in American Samoa? Do you think private technology companies should consider such a thing?

Calarco: "I think private companies might invest in American Samoa from a corporate social responsibility angle. But as things stand, it doesn't make sense from a business point of view. With 55,000 residents and 10,000 households, it is simply too small a market."

Do you believe there's an education / marketing issue here, or is it mostly cost? In other words, do residents simply not know that broadband is available, or is it so costly that only 2,000 or 2,500 residents actually get it?

Calarco: "I don't believe this is an education issue. In our survey, we asked almost 1,700 households questions about their attitudes. About 200 said they did not subscribe because they were not interested. Most of the others that did not have broadband stated they did not subscribe because it was too expensive, it was too slow, it was not available in their area or some other reason (lack of computer, lack of electricity, etc.)."

Have you seen Bluesky's wireless / cellular HSPA+ network act as a replacement for hardline connections for some individuals? Do you think there's reason to believe that wireless will slip in and become more important than wireline given all the deployment headaches?

Calarco: "This is definitely happening. About 20 percent of subscribers use a mobile network as their primary means of connecting to the internet. This could be on a smartphone, via a dongle for PCs or via Bluesky's WiFi hotspots."

How has internet access impacted the American Samoa economy, and how do you think it will impact the islands in the future?

Calarco: "I don't believe it has had an enormous economic impact, at least in terms of employment and livelihood. The major employers remain the tuna cannery and the government, both of which would continue to exist and operate here without the internet.

Instead, I would say that the lack of high speed internet has had a profound effect on the economy. There have been several attempts to set up a call center for outsourcing. American Samoa has many advantages in terms of a literate, native English-speaking population that is seven time zones off from the East Coast of the US -- they could certainly do some business process outsourcing via call centers and it would be advantageous given their location. However, the individuals who were trying to start the call centers have cited the prohibitive cost of broadband as the single greatest barrier to them starting the business."

Is low(er) cost home-based broadband something that residents are clamoring for? Do you see real demand from the people?

Calarco: "Definitely. Over 400 of our survey respondents stated that cost is the factor keeping them from subscribing to broadband. Residents are willing to pay up to around $50 per month; however, in order to get true 'broadband' even by the lowest standards, one would probably need to spend around $200 a month."

Anything you wish I had asked?

Calarco: "I would ask: "Why is the cost so high here when other places like Hawaii, Guam, and even the Mariana Islands have much more affordable broadband options?" The answer is a bit nuanced, but if I had to boil it down, I would say it comes down to the "middle-mile" connection -- the link between American Samoa and Hawaii. Other states and territories have either larger populations or they tap into cables going between larger population centers. Guam, for example, sits on cables that go to Hawaii, California, Japan, China and Southeast Asia. As a result, Guam does not have to foot the bill for the hardware connecting them to the worldwide web -- they can free ride on the bandwidth from cables going from the US to Asia.

American Samoa's cable is a dead end. It goes from Hawaii to American Samoa, and then AS has a cable to Independent Samoa, but that's about it. It's a multi-million dollar, 2,500-mile cable that has to be paid for by a few thousand customers. Thus, there are not a lot of people to share the cost. Meanwhile, the costs for the cables that go through Guam are spread over literally hundreds of millions of households in Asia and North America. American Samoa needs to plug in to a network like the Southern Cross that connects Australia, New Zealand, Fiji, Hawaii and the Western US in order to spread the fixed costs of the undersea cabling over more households.

Bringing down the middle-mile costs will likely bring down the cost to consumers. If the ISPs try to continue to charge prohibitive rates, other ISPs may enter the market to undercut them, so long as they have access to affordable middle-mile connectivity. Lower-cost internet will certainly lead to greater broadband subscriptions. People want the internet; they access it at schools, cafes, work, McDonalds -- they just can't afford it at home at the prices the ISPs charge."

This article was originally published in Distro Issue #47.

Show full PR text

The Most Expensive Internet in America

Daniel Calarco and Colin Richardson from One Economy Corporation

Michael Calabrese from New America Foundation

Streaming movies, telemedicine and videoconferencing are changing the way people do business in America and around the world. Increasingly, access to high-speed Internet connections is essential to economic opportunity, online public services and social networks. Thanks to fiber to the home, high-speed cable service and 4G wireless broadband, most Americans enjoy access to all the 21st century has to offer.

However, connection speeds in rural and remote parts of America lag behind the urban centers. Over the past two years, this rural broadband gap has been documented by the aggregation of a National Broadband Map (www.broadbandmap.gov), an online tool that identifies areas across the country that are under-served or lack broadband coverage altogether. The creation of this map was funded by the Federal Department of Commerce under American Recovery and Reinvestment Act.

One Economy, a global nonprofit that helps low-income people gain access to broadband connections, and the New America Foundation, a think tank that focuses on Internet issues, have contributed to the creation of the national broadband map by surveying America's Pacific Island territories: Guam, American Samoa, and the Northern Marianas Islands (NMI). In the process, we discovered that a combination of high prices and slow download speeds give our nation's Pacific territories the dubious distinction of having the most expensive Internet access in America.

Moreover, while residents are paying for so-called "broadband," measurements of actual-as opposed to advertised-connection speeds show that the typical consumer is receiving service at speeds too slow to support online applications most Americans take for granted. It can be difficult to compare different internet service providers' services because they offer different packages of speeds for different prices. Thus, the best way to compare the services is the price of a megabit per second.

The three US pacific territories could not be more different in terms of their connectivity. Guam is the most fortunate. It sits at the intersection of several major undersea telecommunications cables, which gives the island access to tremendous bandwidth. As a result, the monthly cost of a 1 megabit per second (Mbps) DSL connection in Guam (advertised speed) is very similar to the prices paid by AT&T and Verizon customers on the mainland (see chart, right). Furthermore, if one buys a faster tier of Internet service, the price per mbps goes down.

In contrast, prices in the Northern Marianas Islands (NMI) and American Samoa are much higher. The Northern Marianas Islands are only 100 miles north of Guam, yet their Internet is much slower, and their prices are nearly five times higher than those in Guam. IT&E, the largest internet service provider in the NMI, received a federal stimulus grant to upgrade the undersea cable linking the NMI to Guam. However, prices for consumers have not yet fallen. Moreover, bandwidth in the NMI is so constrained that purchasing higher tiered packages actually increases the price per megabit.

In American Samoa, the situation is far worse. The American Samoa Telecommunications Authority (ASTCA) does not even offer broadband DSL to residents at speeds of 768 kbps, which the Department of Commerce considers the bare minimum for "broadband" today. (BlueSky, the only other Internet service provider on American Samoa, is not any faster or cheaper and only offers cable, not DSL.) ASTCA does not publicly disclose pricing information, but according to an email from a company representative, residential packages top out at 256 kilobits per second (Kbps), which is not much faster than the typical speed of dial-up phone modem connections on the mainland back in the 1990s. ASTCA's 768 Kbps package for businesses costs a whopping $175 a month, making American Samoa the US territory with the most expensive internet in America. Since American Samoa has a GDP per capita of roughly $8,000 and an unemployment rate near 30%, high-speed Internet is simply out of reach for the vast majority of Samoans.

These statistics are for maximum advertised speeds as stated by the telecommunications providers. Unfortunately, Internet performance tests show that the actual speeds available to residents of all U.S. territories is vastly inferior to the mainland and even to most developing nations. Data from tens of thousands of speed tests run by consumers in the three Pacific territories, Puerto Rico and the U.S. Virgin Islands reveal actual Internet speeds that are not only five times slower than Hawaii, but also inferior to the least developed countries of Eastern Europe, including Albania, Belarus and Bosnia-Herzegovina.

In American Samoa, for example, the average measured download speed is 66 Kbps (just 7 percent of the FCC's minimum standard for broadband!). Even in Guam, where advertised download speeds can top out at 25 Mbps, the average measured speed is 91 Kbps. These slow speeds strangle economic development on the islands and badly hamper residents' ability to engage in e-commerce, e-learning, telemedicine, and even communication with the outside world-all of which have a greater importance in places as isolated as the Northern Marianas Islands and American Samoa.

Slow Internet speeds and high prices would be less troubling if there was low demand for Internet access. However, surveys conducted by One Economy have found that residents of the Pacific territories have a strong desire to have broadband internet. For example, nearly 70% of residents of the Northern Marianas Islands use the Internet, but only half of those who use the internet have broadband in his or her home. Most of those without broadband cite cost as the prohibitive factor.

"People talk of information technology and globalization like they are phenomena that are beneficial to all. But that is not the case. There are winners and losers from globalization depending on a community's ability to capitalize on it," says One Global Economy President Moustafa Mourad. "If the American Pacific territories continue to lag behind the rest of the country in terms of internet connectivity at an affordable price, they risk being left behind by a globalizing world."