Broadband for All? Who Isn’t Already Online that Wants to Be?

Posted in Politics/Economics, Technology on March 20th, 2006

As mentioned on Slashdot and in this press release, the Democratic Party is proposing affordable broadband for all Americans within 5 years. While I’m very eager to see my fellow Americans become more tech-savvy and more eagerly embrace the future, I really wonder how effective such measures could be. I really wonder who isn’t on broadband that wants to be, studies show cost isn’t a major barrier. I wonder how do the Democrats hope to accomplish such things and wonder what role government should be playing.

A Parks Associates study published late February shows slowing internet and broadband growth. Just this week BusinessWeek published their take on the study. Their analysis: Many consumers who want to go online are online. Of the 39 million homes without Internet access only, 8 million have computers in the home and only 2 million of these plans to get internet service of any kind. Another 300,000 homes might go online if the price were cheaper.

Based on the preceding paragraph, we can say that about 2.3 million offline households would be affected by a affordable broadband. As a point of reference, there are 108 million U.S. households. So, one million homes translates into slightly less than 1% of all U.S. households. Making broadband as cheap as dial-up won’t have much of an effect on the remaining households with computers, but lacking internet service. Many of these homes’ are content to simply access the internet from work. So.. What about moving people from dial-up to broadband?

In terms of dail-up to broadband transitions, the Parks Associates study indicates that “42% of the U.S. population has broadband access at home, while 22% use dial-up.” (Why were not talking about households anymore, I don’t know – I’m going to assume they meant 22% of households since all other citations reference households). About a month ago, a study came out suggesting that about1/3 of dial-up users would adopt broadband if the price were cheaper (Sorry – I can’t find the source). So, let’s just assume that 1/3 of 22% of America’s 108 million homes would be additionally affected by the Democratic “Broadband for All” proposal. That translates into another 7% or 7.8 million homes.

I hope delivering affordable broadband to these 10.1 million households (7.8 + 2.3), or 9% of all households, would be accomplished by creating some real competition in the broadband marketplace. Unfortunately, due to the various decisions of the FTC competition to provide broadband service is somewhat limited in this country. You generally will only find a 2 or 3 companies, if that, offering broadband to a given household. The situation gets worse in smaller cities and more rural locations. At this point, there is little reason for cable companies and telecoms to compete on price. I hope this is what Nancy Pelosi means when she speaks about providing affordable broadband for all.

There is really no need for any expansive government program. While I’m not conservative, I just don’t want another instance to emerge where Democrats can be painted as advocating “big government” or “big spending.” Instead let’s see what real market competition can do to the price of broadband.