There are many factors that contribute to UDP packet loss. It can be the Internet, and typically is, but it can also be the local computer system/LAN configuration causing the problem.
UDP is used due to it being faster than TCP and requires less network ovehead.
What type of connection do you have? If it a dial-up, what type (brand/make) of modem is it?
Also make sure you have no background programs running that use the network, like the Windows Auto-Updater, the Windows Messenger (both of them), and so on.