Demand is not the primary reason for low broadband adoption.
A news item on our site last Thursday repeated the tired argument that consumers are slow to adopt broadband because of low demand. I’m not buying it, and here’s why. First, we use the same Web as Europeans do, yet Europe has substantially higher broadband adoption rates. Second, the very same users who fail to adopt broadband at home are surfing in droves at the office. Presumably, they would do the same at home if it were worth their while. Third, the Web keeps getting more and more compelling, with better e-commerce services, more analysis and opinion through blogs, and more rich media. Many more sites today are vying for a smaller piece of the same pie.
Why is the pie staying the same? Well, demand does have something to do with it, but it is only relative to the supply. The supply of value broadband is still poor. Either it’s overpriced–$70 megabit service–or it does not offer enough of a performance boost, as in the $30 128 kilobit service. The only time we saw rapid broadband adoption was when the Baby Bells tried to grab huge market share by offering $19.95 DSL. That promised to be affordable and fast, but it turned out to be a poor value because it lacked usability and reliability. Those who sought value in those deals were just burned by broadband and have been slow to test the waters.
Where demand does come in is at the low end. If sites did not continue to grow in size per page with multiple ads, and in pages with pop-ups and pop-unders as they do now, going twice as fast as a 56K connection would be worth an extra 10 bucks a month. So demand for ad-heavy content is relatively low. The additional friction added to the Web in the form of money-making schemes renders 128 Kbps not worth changing providers and paying extra each month. But if a provider offered megabit broadband at $30 per month, we would see widespread broadband adoption.
Why doesn’t someone come along and offer fast and cheap broadband? Because of the current anti-competitive environments, not because of low demand. The Baby Bells tried that, and they lost huge dough doing it, not because it costs them a lot to offer the service, but because it costs them a lot to support it. So they are not willing to try again, despite improvements in the underlying technologies. And there simply is not strong enough competition willing to resell Baby Bell infrastructure at those low rates. The way Covad and its kin make money is by splitting infrastructure it pays $30 for and reselling it four times. Thus, it pays $30 a megabit that for it resells four 128 kilobit connections at $30 per. That’s not going to get it done in the current ad-heavy Web world.
James Mathewson is editor of ComputerUser magazine and ComputerUser.com