Waiting for broadband: August 13, 2001 issue of New Thinking

August 13, 2001 New Thinking:
Waiting for broadband

Website content management

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August 13, 2001

Waiting for broadband

By Gerry McGovern

Some websites still don’t get it. They behave as if broadband had already arrived, delivering large graphics, video, audio and animation. The reality is that for the average consumer broadband access is at least five years away.

On the surface, broadband use is undergoing healthy growth. According to the US Federal Communications Commission, the number of American broadband subscribers doubled in the last year. Digital subscriber line (DSL) use grew by 1.5 million new lines, representing a growth rate of 435 percent. Cable added 2.2 million new lines, representing growth of 153 percent.

But the broadband industry is in turmoil. Broadband service providers are going out of business at an alarming rate. “Regular readers know that Business Week SmallBiz has been warning for months about the shaky finances at some of the biggest vendors of high-speed Web service,” a Business Week article wrote August 9. It goes on to discuss the latest broadband victim, Covad Communications, who had 330,000 customers. 330,000 customers represent over 20 percent of the 1.5 million subscriber growth noted by the Federal Communications Commission.

Covad joins a lengthening list of bankrupt broadband companies, including Rhythms NetConnections Inc., Winstar Communications, NorthPoint Communications, and PSINet Inc. When NorthPoint Communications went bust a few months ago, AT&T acquired its business, minus the customer base. NorthPoint’s customers were mainly smaller ISPs, and AT&T claimed that such customers were expensive to service and often delayed payment.

The broadband story globally is no different. According to a report published in April by NetValue, South Korea is the only country in the world where more than 50 percent of households have access to the Internet that is equal to or faster than DSL. According to NetValue, 11 percent of American households had broadband access. In Europe, 5 percent of German, 4 percent of French, and 3 percent of British households had such access.

The question is: if there is such a demand for broadband, why is the penetration so low and why are so many broadband companies going bust? There are two connected reasons. First, it’s a lot more expensive to install and run broadband services that was originally estimated. Second, the price the customer is being charged is too low.

Will the customer pay significantly more for broadband? It depends on the customer. Businesses that can become more efficient by using broadband will pay more. The ordinary household will require a lot more convincing. To them, the Internet is fast enough. Or, to put it another way, they can live with the slower speeds, rather than having to fork out extra money every month. The bottom line is that for a great majority of people there is no compelling reason to pay a lot of money to get broadband.

This all means that for a long time to come the Internet will remain a multimedia-poor, text-rich environment for the average person. But then the average person has never seen the Internet as a place where they look for a broadband experience. For most, they’re only there for the text. All the other bandwidth-hungry stuff they can get already on their TVs, with their computer games, in their magazines or movie theatres. They like the Web for the simple but powerful reason that it allows them find out stuff.

Gerry McGovern

Related content

NetValue website

May 8, 2000: 13 things to know about broadband

February 17, 1997: The Internet is not our tea maker

October 28, 1996: The old Web

July 15, 1996: The Internet enables the message

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