Sunday, July 20, 2008

Uneven U.S. broadband deployment distorts market perceptions, drives digital downturn

The uneven, hodge podge deployment of last mile broadband infrastructure in the United States in the current decade has affected market demand by distorting perceptions about broadband availability. In areas that still don't have wireline-based broadband access in 2008, some inhabitants have apparently concluded that if they don't have service now they aren't likely to in the foreseeable. The practice of cable companies and telcos of not giving residents time frames as to when broadband will be offerred only reinforces that perception.

Commenting on the recently released Home Broadband Adoption report by the Pew Internet and American Life Project, the National Rural Telecommunications Cooperative (NRTC) observes in its July 2008 Update newsletter that the perception ironically persists even when broadband services are actually available. That naturally drives down demand, known as "take rate" among providers.

Cost and lack of availability were the main reasons rural consumer gave for not subscribing to broadband. Twenty-four percent of the rural dial-up users in the Pew survey said they would take broadband if it were available. This might indicate that rural consumer perceptions in some areas do not match the actual amount of service available from rural broadband providers. For years, NTCA broadband surveys have shown that rural providers have been building out broadband services, but that there have been very low take rates.

This market phenomenom isn't confined to rural areas since broadband black holes can be found in all areas of the U.S.: urban, surburban, quasi-rural and rural.

Low take rates understandably make providers reluctant to invest in broadband infrastructure, particularly in higher cost areas. The end result of this depressed dynamic is self perpetuating and highly persistent broadband black holes in those areas where there are in fact no wireline-based broadband services. Providers in turn can justify the existence of these black holes, fearing low take rates. It's the equivalent of an economic downturn: a lack of confidence on the part of both sellers and buyers.

This is primarily a supply side problem given that the supply of broadband services in these areas has been nonexistent over a period of many years. The way out of this digital downturn is for providers to drive demand by both aggressively deploying services and advertising their availabilty. The latter element is key to overcoming entrenched market perceptions in long-established broadband black holes that broadband isn't available and isn't coming any time soon.

On Sept. 8, 2008, the Broadband Stakeholder Group (BSG), the British government’s advisory group on broadband, issued what it termed "the most comprehensive analysis produced to date on the costs of deploying fibre in the UK."

This report supports the notion that ISPs must proactively drive up demand for advanced services in order to support the business case for fiber-based broadband infrastructure deployment in costlier, less densely populated areas instead of passively writing them off as unservicable as all too many are wont to do. “If operators could achieve a higher than expected level of take-up in rural areas, then the business case for deployment in those areas could improve significantly”, said the BSG's CEO, Antony Walker.

No comments:

Web Analytics