Further Broadband Penetration Deconstruction

By David Byrd, VP of Marketing and Sales, Broadvox

Before I begin, I want to remind you that most of the numbers used for the subject for this week’s blog come from the Rural Utilities Service (RUS), National Telecommunications Infrastructure Administration (NTIA), Federal Communications Commission (FCC) and National Telecommunications Cooperative Association (NTCA). I am also using numbers from Insight, Belcher and ChannelVision Magazine. As this is not a college dissertation, and I do not plan to gain economically, I will not be labeling all of the usage going forward. OK, the disclaimer is out of the way. Let’s see what is really going on in the world of broadband in the U.S.

Generally, it is agreed that the U.S. has 120 million households, of which, 58 million (48 percent) do not have broadband access and 45 million (37 percent) have no access to the Internet. We can be forgiven for assuming that the lack of broadband access is due to geographical considerations; however, that would be wrong. Only 12 million households in this number are considered rural, or stated another way, only 10 percent of households are without Internet access due to infrastructure cost considerations. But, how can that be? The primary reason given for the $7.2 billion of telecom stimulus spending is to expand access to broadband in rural areas. However, two things have to be noted, if that were true, it would do little to address our level of broadband penetration compared to the other G7 nations. It would also leave the majority of those, currently without any form of Internet access, still without any Internet access. Therefore, it is worth noting that the second reason for the stimulus spending was to address “underserved” markets.

Again, a most notable objective, but something is still missing. Using ZIP Code Tabulation Areas (ZCTAs) to measure broadband availability and the number of broadband providers (i.e. competition), we find that the percentage of ZCTAs with broadband access across the U.S is 99.6 percent, with an average of seven providers. Wow! How can there be any deficiency in broadband access or penetration with such high percentages? The definition of broadband is fairly low (200 kbps) considering the world stage, where the U.S. ranks an abysmal 18th, and among the G7 nations is trailed only by Canada (a far more rural country). However, it is clear that “if we build it, they will come” may not apply to solving our penetration efforts.

Among the top two reasons given for not having Internet access is “they do not have a computer.” Imagine that, in this day and age, fully 25 percent of respondents state that they do not have a computer and therefore do not need Internet access. The second and No. 1 reason is also a bit of a shocker. In a world where, we say that everyone has or wants an iPhone and cannot live without an iPod, we learn that 32 percent say, “There is no need for the Internet.” Expanding access to the Internet for 57 percent of respondents will do little to nothing to change their level of adoption. Therefore, we need to address this lack of use and interest in the Internet by increasing knowledge, awareness and communicating the value proposition of “being on line.” In a study done by Stanford, the two most important factors facilitating or inhibiting Internet access are education and age, and not income, or race/ethnicity, or gender. Bottom line, if the U.S. is serious about increasing the level of penetration for broadband usage, then we must address these two factors, and spending money to simply build infrastructure will not solve the problem.

Expanding the adoption rate of level of penetration for broadband usage will in turn expand the revenue potential for ISPs, ITSPs like Broadvox, VoIP and SIP Trunking providers and the application developers and service providers. The IP ecosystem in the U.S. will enable us to remain competitive globally.

See you on Friday…

David Byrd is vice president of marketing and sales for Broadvox, and is responsible for marketing and channel sales programs to SMBs, enterprises and carriers as well as defining the product offering. Prior to joining Broadvox, David was the Vice President of Channels and Alliances for Eftia and Telcordia. As Director of eBusiness Development with i2 Technologies, he developed major partnerships with many of the leaders in Internet eCommerce and supply chain management. As CEO of Planet Hollywood Online he was a pioneer in using early internet technologies to build a branded entertainment and eCommerce website company partnered with Planet Hollywood. Having over twenty years of Telecom sales and marketing experience, he has held executive positions with Hewlett-Packard, Sprint and Ericsson.

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