Broadband lagging in U.S - First in/First out - Understanding Broadband Demand: A Review of Critical Issues report - Editorial - Industry Overview

Computer Technology Review, Nov, 2002 by Joshua Piven

A disturbing new report from the Commerce Department's Technology Administration has found that broadband service in the United States is falling behind other countries, and recommends new services and pricing models to spur adoption.

The report, "Understanding Broadband Demand: A Review of Critical Issues" was issued in late September. It has found that supply currently exceeds demand in all but the most rural areas, and that compelling content is lacking. The report has found many shortcomings in current service offerings. Consumers are concerned about high costs; disappointed with the quality and types of content available (especially lack of movies, music, and local information); frustrated by inadequate customer support and a lack of plug-and-play consumer-premises equipment; and, in general, lack confidence in the Internet due to security and privacy concerns.

Another disturbing aspect of the report is that the U.S., while still leading in the total number of broadband connections, has fallen behind many countries in percentage terms. The U.S. currently has 10.4% of Internet-connected households on broadband. South Korea has the largest number of broadband households in percentage terms, at 51.7%. But the U.S. is now also trailing Canada, at 19.7%. In fact, the nation is not even in the top five, lagging behind Hong Kong (26%), Taiwan (18.2%) and Sweden (13.4%).

The report does not take into account the level of availability of broadband service in each country. However, according to the latest numbers available from the National Cable & Telecommunications Association (September, 2002), more than 75 million U.S. households can now get broadband via cable modem service if they want it. Data from a 2001 Morgan Stanley report estimated that 90% of Americans will be able to sign up for either DSL or cable by the end of 2002 (although other data has suggested that only 31% will have a competitive choice between these platforms).

The report also makes clear that today's broadband access methods and throughput levels are likely to be inadequate for the applications recommended. According to the report: "The current generation of broadband technologies (cable and DSL) may prove woefully insufficient to carry many of the advanced applications driving future demand. Today's broadband will be tomorrow's traffic jam. [While] long-haul data transport capacity exploded in the 1990s, last-mile capacity upgrades have proceeded much more slowly." The report says that estimates for new investments needed to build out a significantly more robust and capable national broadband Internet range start at $100 billion, conservatively estimated by the National Research Council.

Still, it's not all bad news. Broadband access by businesses is growing quickly: A survey commissioned by the Technology Policy Group and released in September found that 48.3% of U.S. businesses used some broadband service, up 27% from the prior year. Nielsen NetRatings estimated at-work broadband growth in 2001 at 42%, to 25.5 million office workers. The down economy is clearly affecting broadband uptake: cable modem and DSL service run $50 per month, on average, while dial-up is closer to $20, or less. While those who have made the jump to high-speed can't imagine going back, those who have not do not see a compelling reason to do so, at least not yet. Until the price differential shrinks and content improves, the numbers are likely to continue to disappoint observers.