Where is the market demand for broadband?

by Andy Oram

Related link: http://www.onpointradio.org/shows/2005/04/20050426_a_main.asp



The NPR radio show
On Point
had an in-depth discussion this evening of the lagging adoption of broadband in the U.S., which is certainly increasing but not at a rate matching advanced Asian economies. One caller raised a formalistic and rigid version of standard free-market economic arguments: if there is slow growth in broadband, it must be because there aren't that many people who want it. Where, he asked, is the demand?



In a situation like this where oligopolies in the local loop use political and market muscle to hold back competition, one has to look for other signs of the need. For instance, the rural areas of this country are emptying out. Even many cities are doing poorly as population piles up in a few megalopoli, particularly along the coasts.



This has all kinds of negative social ramifications: a crisis in affordable housing, increasing ecological damage and traffic snarls, exposure to flooding, and so on.



Basically, people are leaving the rural areas and the middle of the country because they can't get jobs. They also find themselves disadvantaged when it comes to educational opportunities and other amenities. High-speed Internet access, with opportunities for telecommuting, distance education, medical videoconferencing, and other modern applications, can help restore a healthy balance to the country.



In short, demand is masked by flight.



The show was quite valuable in its discussion of the suppression of competition in last-mile access. The baby Bells squashed the hundreds of small Internet providers that tried to get a foothold in local markets in the 1990s and then told the FCC (with the desired results) that competition would be aided by having less competition--that is, that the FCC should let the Bells and cable companies duke it out without harrassment from small innovators.



Now, as mentioned on the radio show, the telecom companies and cable companies are using the same argument to hold back municipal networks: supposedly, holding back competition is good for competition. The irony is that municipalities step in to take on the big job of building out a network only when the private companies have stayed away. And a government-run fiber network can lay the groundwork for competition at higher layers.



Let's have some real competition, and then the hidden demand will reveal itself.


10 Comments

Inkling
2005-04-26 22:45:27
A children's story
The sky is falling, the sky is falling, the sky is falling....


jwenting
2005-04-27 00:09:22
economics
Just about all over the world except in the US phonecalls are metered per second or per minute.
As such, broadband is chosen by many who have no need for the raw performance simply because it's cheaper than dialup.
In the US where dialup is cheaper than broadband those people may well stick to dialup.


I'm talking here about people who use email and maybe read an online newspaper or use a search engine once a week.
These people don't need the speed of DSL, but in Europe may choose DSL anyway because at the end of the month it turns out to be cheaper than dialup.
In the US, where dialup doesn't cost anything except the hardware, they stick to dialup.

rafeco
2005-04-27 06:20:48
City living versus rural living
As Stewart Brand pointed out in a post to the O'Reilly Radar the other day, urban living is by far the most environmentally-friendly option.


I live in a condo in the downtown of a medium-sized city. My land use is negligible. I drive less than half as much as I did when I lived in the suburbs.


People may prefer a rural lifestyle, but chances are they aren't doing the environment any favors by living there.

evgen
2005-04-27 09:50:12
Lots of assumptions there...
Migration from rural to urban areas has been happening for millenia, and accellerated into the vertical part of the J-curve after WWII. In the US these people fleeing the farms had universal access to the same telcom infrastructure that the urban areas had via government, while railroads put in to move agricultural good provided easy access to shipping and transportation. Neither of these had any impact on slowing this migration pattern.


Broadband access has nothing to do with rural to urban migration.

USA-sucks-4-broadband
2005-04-27 09:51:38
we stuck on dialup less than 90 miles north of NY City
We still stuck on dialup less than 90 miles north of NY City in New York State.
There is no broadband available here despite the taxes we pay.
Time Warner Cable who holds the franchise wants over $26,000 to install cable
to my house. That's rediculous, I'm fighting
this for 5 years.
Read all about it at:
http://www.dslreports.com/forum/remark,9512648
And DSL is not available. Verizon does not supply DSL to this phone exchange
I put up a sign on the road near my house: Time Warner Sucks
~
roger69
2005-04-27 16:16:20
City living versus rural living
I don't really agree with the conclusions that Stewart posited in his talk.


Sure, living in an urban area reduces land use. You do have some environmental benefits by aggregating delivery of food, fuel, etc.


You increase our societal dependence on fossil fuels because more fuel has to be spent to bring food, clothing and other supplies INTO the urban area, increasingly from overseas.


Let's look just at the food, something I can at least talk about with authority:


Look at the fruit in your local grocery store. Where did it come from? You have pears and apples coming by boat from Chile, New Zealand, China. You have citrus year round. Citrus does not fruit year round. Half of the year it comes from south America or points beyond.


Your average fruit or vegetable travels over 1500 miles to get to your table. How is this efficient or environmentally friendly? It's not even sustainable, and I think as gas prices continue to rise everyone is going to find this out.


Living in a rural area gives me the land to grow my own fruit and vegetables. Unfortunately that is a skill that most urbanites no longer posess, and it's not something you can just learn overnight.


I personally see this as a much bigger problem than broadband deployment in the US, but that's just me.


Also just me: You'll never get me to live in a big city again. I don't like the noise, the pollution, the crowds or the traffic. I like being able to see the stars at night and hear birds in the trees.


Roger

jwenting
2005-04-28 01:09:16
we stuck on dialup less than 90 miles north of NY City
My parents (not in the US...) used to live 5km from the nearest village.
In the village they had cable TV, sewers, running water, gas.
My parents had nothing, despite being charged taxes for maintenance of the sewer system, water lines, etc. etc.


They could not run their electric oven and the TV (using an antenna of course) at the same time because the electrical system couldn't keep up with the load.


Took 15 years of lobbying to rectify the situation. In the end they only got hooked up when underground oil tanks (for heating) and sewage tanks were outlawed and the city was forced to put in the pipes.


Even then they didn't get cable TV, the cable company (UPC) demanding €10K per house (for each of the 10 or so houses in the street) to lay the 3km of cable that would be required.

brian.mcconnell
2005-04-28 10:14:32
Broadband profitability
I've been working in telecom since my college days. The basic problem with providing broadband service via cable or DSL is that these services are distance sensitive, DSL in particular. DSL isn't an option if you're more than 3 miles from a central office switch. IDSL (similar to ISDN Basic Rate) provides 128kbps out to a slightly larger distance, but not much.


Then there is profitability. It is easier to turn a profit in an urban or suburban environment with a high user density. There it makes sense to invest in infrastructure upgrades. This is much harder to justify in rural areas, especially if the time to recoup the investment is longer than the expected lifetime of the gear (who knows when DSL will be obsoleted by something else).


Waiting for the telcos to suddenly become beneficent is unwise. Rural communities should instead form telecom cooperatives to build their own infrastructure. You can accomplish a lot with modifed Wi-Fi gear, and even more with forthcoming 802.16 equipment. Get the community to pitch in for a DS-3, then improvise last-mile solutions to get connectivity out to the hinterlands. But don't wait for Verizon, you'll probably be waiting for a long time.

rberger
2005-05-02 17:24:37
Monopoly/Oligopoly stifiles innovation
The US is now 16th in the World in terms of broadband penetration. We use to be #1. Its because telecom has become re-monopolized in the US. There is no incentive for the Telcos or Cable Cos to deploy more broadband. The market in the US doesn't even know what its missing.


The last mile access physical plant is a natural monopoly though. But that doesn't mean it should be controled as a traditional monopoly.


Just at Municipalities build and maintain roads, but are not transportation service providers, Municipalities should build and maintain physical telecom infrastructure. Just layer 1! Conduit, Telephone Poles and dark fiber. Then an open access, open competitive market can be made of lighting the fiber and delivering services over that fiber. Just as there is an open market of UPS, Fedex, private transport, public transport on roads.


Then there would be a nice burst of innnovation and lots more bandwidth for us all.

tfo
2005-05-03 23:05:12
Broadband Only!
The reason I don't have broadband in my home at the moment is because I am currently unable to purchase only broadband. With a local telecom and cable monopoly (two different companies: BellSouth and Comcast, respectively), I can't get DSL without an active phone line, and I can't get a cable modem without cable. Well, I don't want to sign up for phone service because I have a cell phone and don't want an extra monthly surcharge for bandwidth. Additionally, I don't want a cable television package and refuse to pay a surcharge for pure cable bandwidth.


Until there is an opportunity for me to purchase broadband as a utility independent from phone or cable service, there's really no pont.