State of U.S. Broadband: Demand Hits Speed Bumps

A new report from Pew Internet shows that broadband growth in the U.S. has slowed down to a crawl, a sign that U.S. broadband carriers would have to work hard to find ways to grow their overall businesses. Pew points out that 55 percent of adult Americans have home broadband connections.

According to some estimates there are over 64 million broadband connections in the U.S. Some additional interesting bits from Pew’s report:

  • Broadband users report an average monthly bill of $34.50 for high-speed service, 4 percent lower than the $36 reported by broadband users in December 2005.
  • 38 percent of those living in rural American now have broadband at home, compared with 31 percent who said this in 2007.
  • The percentage of Americans with broadband at home has grown from 47 percent in early 2007 and 42 percent in early 2005.
  • Cable broadband users pay $37 a month, down from $41 a month in 2005. DSL subscribers pay $31.50 a month down from $32 in 2005. Apparently, cable guys responded by price cuts (more like lower tiers) with increased competition from DSL companies.
  • 2 percent of home subscribers have fiber optic connection. Verizon FiOS should be thanked for this development.
  • The research group finds out that low income groups — households with annual incomes of less than $20,000 — have started to cut back on broadband spending. Their broadband adoption rate had dropped to 25 percent in 2008 from 28 percent in 2007. It isn’t much of a surprise, because the economic downturn is forcing people to control and cut back their spending.

    Earlier this year, telecom operators like Qwest & AT&T, pointed out they were experiencing the impact of this penny pinching. Of course, what didn’t help was the fact that it was their geographic footprint that played host to the housing bubble. New home sales drove the demand for broadband connections and as foreclosures started, the broadband party also started to wind down. The net new additions for the second quarter 2008 will tell an interesting story.

    My feeling is that this is hurting the DSL providers more than cable companies and they are scrambling to respond by offering higher speeds. The smaller providers like Embarq & Windstream could be impacted the worst by the slowdown.

    There is some research that shows that speed bumps are not quite the panacea for these carriers, though they might provide some temporary relief.

    Bruce Leichtman recently conducted a survey and found out that nearly 72 percent of cable broadband subscribers, and 62 percent of telco broadband subscribers are happy with their broadband connection’s quality and speed. Only 24 percent are interested in getting faster connection and a mere 11 percent of broadband subscribers would pay an “additional $10 per month to double their Internet speed.”

    In comparison, Pew’s report shows that 35 percent of dial-up users want broadband prices to decline further — fat chance of that happening when most carriers are dreaming of tiered Internet plans. Overall 62 percent of dial-up users say they are happy to be Slowskys. (That should make AOL and United Online rather happy.)

    Download Pew’s Home Broadband Report (pdf.)