US broadband market stalls

07 Sep 2006

What's the matter with high-speed broadband in the US‾

Some 62 million Americans are still using their telephone lines to dial into the Internet, according to recent figures from the Pew Internet and American Life Project. Other figures from research firms like Forrester show that only about 40% of Americans have high-speed connections at home, 30% rely on dial-up and 25% don't have any Internet connections at all!

This at a time when China is poised to overtake the US to become the world's largest broadband market. New figures from Ovum show China will have 79 million broadband subscribers by next year. And overall penetration is just above 3% in China, which means there's plenty of room to grow. Ovum predicts 139 million subscribers by 2010, and a subscription growth rate of 75% annually.

These are remarkable figures because they come at a time when hype about the Internet extends to just about every facet of American life, and news about high-speed connections permeates the landscape. Cable companies are marketing cable-modem technology like madmen; telcos are rolling out inexpensive DSL service and spending billions of dollars to lay fiber; municipal wireless networks are spouting up like weeds and even broadband-over-powerline (BPL) is being pushed by the FCC for rural areas. (Some rural localities have begun installing their own Wi-Fi networks.)

Just this week, IBM and Cisco joined a consortium to provide free, high-speed Internet access to 2.4 million residents in California's Silicon Valley by next year. Minneapolis selected service provider US Internet to build a city wireless network to 95% of the city. And AT&T announced plans to build a wireless network in the Midwest. Last week, satellite broadband and voice provider Clearwire announced plans to set up shop in Oahu, Hawaii.

So how come the US is lagging behind most of the developed world in broadband access‾ Some analysts cite price as a factor, but that seems doubtful. DSL deals from Verizon and ATT often are priced below monthly dial-up rates, and millions of cable television customers can get cable-modem service packaged at a discount with their TV and phone service. So why stick with slow dialup‾

The main problem seems to be the free-market telecom frenzy that has enveloped the US (and much of its population) in technology and price uncertainty. With no national broadband policy in place, multiple service providers are targeting affluent urban areas, while leaving many poor and rural dwellers to fend for themselves. In big cities, that means consumers face daunting broadband choices. Should they sign a contract with their cable provider or telco‾ Wait for the installation of a Wi-Fi network‾ Choose an alternate provider like EarthLink‾ And which broadband technology is the best‾ Many just stick with what they know best: the slow but reliable telephone.

Even the service providers themselves are confused. A plan by the city of West Hollywood, Calif. to install Wi-Fi has stalled for two years because the local utility company can't decide whether to grant a right-of-way for the equipment on its lampposts.

Inevitably, this is going to change, but the change would come much more quickly if a national policy and direction were put into place, consumers knew what to expect and the service providers better focused their efforts. Until then, Americans will have another reason to worry about the rise of China.

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