High-Speed: Spread Too Thin?

The New York Times recently ran an article addressing the issue of high-speed Internet access in the United States. The article examined the often slippery language used by those with a vested interest in winning customers, and stated that such language obfuscates true connection speeds, making it difficult for consumers to determine which option may best suit their needs. As true as it is that a reliable method of determining actual connection speeds needs to be dealt with, some argue that there is a larger issue to be discussed. Those faced with broadband options may be the lucky ones; many in the U.S. have no options and in some cases no access. Just as the language of broadband carriers confuses the issue of speed of access, the numbers reported on broadband penetration confuse the issue of how many Americans actually have high-speed access to the Internet at all.

The New York Times aptly points out, “More than ever, the nation’s phone and cable companies are trumpeting the speed of their Internet connections with ads that pitch ‘blazing broadband’ at ‘up to 100 times faster than dial-up.’ But as with so many consumer services, the devil is in the fine print.” One much discussed phrase in the Times’ article is, ‘up to’. As editor of DSL Prime, a newsletter that tracks the broadband industry, Dave Burstein offered this comment, “‘Up to’ is a weasel term that should be taken out of the companies’ vocabulary.” This thought is mirrored by others who note that the maximum speed cited by vendors is often achievable only under the best of circumstances; these may include distance from the station and the number of people online at a given time. This is no secret, as the New York Times reports, even providers are aware of it. “Eric Rabe, a spokesman for Verizon, acknowledged that the maximum speed promised was what was available ‘under optimal conditions.'” In their defense, providers have argued that these speeds are achievable and that at the very least serve as a benchmark for comparison. Determining an accurate definition for high-speed is, according to the New York Times , important; “As the options proliferate, consumer advocates say it is getting tougher for people to tell what service is best for them — and which packages promise more than they deliver.” However, those faced with this question may be among the lucky. Though various reports indicate that broadband adoption is increasing steadily in the U.S. and is serving citizens well, others strongly disagree.

eMarketer reported at the end of December that, “an important milestone will be reached over the next 12 months — high-speed Internet penetration will surpass 50 percent of U.S. households, equating to over 60 million residential broadband subscribers.” A Nielsen/NetRatings report released on December 12 states, “78 percent of active home Web users connected via broadband during the month of November, up 13 percentage points from 65 percent of active Web users a year ago.” Of the report Forbes says, “That’s 1.4 percent greater than in October and up 19.7 percent from November 2005, when 64.9 percent of Internet users had broadband at home. In the last year, the percentage of home Internet users with high-speed connections grew about 1.5 percent per month.” The Diffusion Group (TDG) reported the numbers a little differently at the end of November, “2006 will end with close to 50 million broadband households, an increase of 18.2 percent from year-end 2005. Looking forward to 2010, TDG anticipates that more than 71 million U.S. households will connect to the Internet using some form of broadband technology.” Leichtman Research Group Inc. reported in mid-November that the 20 largest telephone and cable providers, which represent 94 percent of the market, “acquired over 2.5 million net additional broadband subscribers in the third quarter of 2006. These top broadband providers now account for nearly 50.9 million high-speed Internet subscribers – with cable having over 28.1 million broadband subscribers, and telephone companies having 22.7 million DSL and other broadband subscribers.” Numbers like this are one reason advocates are happy with broadband adoption in the U.S., but there is another view.

MacObserver states that, “The penetration of broadband in U.S. households has steadily increased over the past few years, but now the growth is slowing.” They base their statement on a recent report from WebSiteOptimization. Specifically that report, from November, indicates, “In October 2006, broadband penetration in U.S. homes grew 0.27 percentage points to 76.6 percent, up from 76.33 percent in September. This increase of 0.27 points is well below the average increase in broadband of 1.16 points per month over the last six months.” In a piece on satellite broadband New York Times reported that, “Roughly 15 million households cannot get broadband from their phone or cable provider because the companies have been slow to expand their high-speed networks in areas where there are not enough customers to generate what they regard as an adequate profit.” There is clearly a disconnect in the perception of broadband adoption in the U.S. FCC Commissioner Michael J. Copps notes the disconnect in an article he wrote for the Washington Post, “Many households are hostage to a single broadband provider, and nearly one-tenth have no broadband provider at all.” His dissatisfaction is quite obvious; “America’s record in expanding broadband communication is so poor that it should be viewed as an outrage by every consumer and businessperson in the country.” It is interesting that a member of the FCC offers such statements; a year ago when the FCC released its study of broadband in America it reported adequate competition and optimistic penetration rates. However, Copps is not the only government representative criticizing the FCC’s reportage. After the release of the FCC’s report, the Government Accountability Office (GAO) replied with what some see as a harsh rebuttal. The title of the GAO’s report, “FCC Needs to Improve Its Ability to Monitor and Determine the Extent of Competition in Dedicated Access Services,” is probably enough to indicate something is askew. If the title is not enough, one could use the following statement from the report as a summary, “Although it is clear that the deployment of broadband networks is extensive, the data may not provide a highly accurate depiction of local deployment of broadband infrastructures for residential service, especially in rural areas.”

While some may debate the FCC’s reporting and others may look to qualify “high- speed,” it may be better to take a worldwide view of the situation. With the numbers being reported, even including the possibility of a plateau in broadband adoption, one might be led to believe that the U.S., on track to pass 80 percent adoption sometime this month, would be a hard country to beat. It might, therefore, be surprising to find out that according to the International Telecommunications Union the U.S. ranks 15th.

A more complete version of this posting, with journal articles, and research reports can be found at the website of Analyst Views Weekly.

More information on this topic can be found in the Online Access section of Northern Light’s Internet & Information Services Market Intelligence Center.

And in the following articles:

U.S. Broadband Reaches More than Half the Country
eMarketer, December 21, 2006
According to eMarketer’s estimates, an important milestone will be reached over the next 12 months — high-speed Internet penetration will surpass 50% of US households, equating to over 60 million residential broadband subscribers.

Broadband Penetration on the Rise
Forbes, December 12, 2006
More U.S. Internet users have high-speed access at home than ever, and they’re spending a lot of time online playing games. But gaming and social networking sites ate up the most time.

Not Always Full Speed Ahead
New York Times, November 18, 2006
More than ever, the nation’s phone and cable companies are trumpeting the speed of their Internet connections with ads that pitch “blazing broadband” at “up to 100 times faster than dial-up.” But as with so many consumer services, the devil is in the fine print. In many cases, consumer advocates and industry analysts said, customers do not get the maximum promised speed, or anywhere near it, from their cable and digital subscriber line connections. Instead, the phrase “up to” refers to speeds attainable under ideal conditions, like when a D.S.L. user is near the phone company’s central switching office.

With a Dish, Broadband Goes Rural
New York Times, November 14, 2006
In bringing rural America into the fast lane, WildBlue and its chief rivals — Hughes Network Systems, which markets under the name HughesNet, and Spacenet, which sells the StarBand service — are filling one of the biggest gaps in the country’s digital infrastructure. Roughly 15 million households cannot get broadband from their phone or cable provider because the companies have been slow to expand their high-speed networks in areas where there are not enough customers to generate what they regard as an adequate profit.

America’s Internet Disconnect
Washington Post, November 8, 2006
America’s record in expanding broadband communication is so poor that it should be viewed as an outrage by every consumer and businessperson in the country. Too few of us have broadband connections, and those who do pay too much for service that is too slow. It’s hurting our economy, and things are only going to get worse if we don’t do something about it.

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