Wednesday, August 13, 2008

USA - slow speeds and slow adoption

U.S. Broadband Speeds Too Darn Slow; Adoption Hits 7-Year Low
See also Leichtman research release

The bad news: Broadband adoption slipped to a seven-year low last quarter. The worse news: It could take a century for the United States to catch up to broadband speeds in Japan, given the rate at which services are improving here.

Those are the findings of two separate studies -- both independently released this week -- that point to a grim state of affairs in the broadband market.

One key holdup for broadband adoption last quarter, according to a Leichtman Research Group report, is that the telcos' pushed higher-speed, premium services (such as Verizon's FiOS and AT&T's U-verse) at a time when basic DSL was a financial stretch for many Americans.

"Net broadband additions in the quarter were the fewest of any quarter in the seven years [Leichtman Research Group] has been tracking the industry," said Bruce Leichtman, LRG president and principal analyst, in a prepared statement. "The decline in additions this quarter compared to the same period last year was exacerbated by Verizon and AT&T's emphasis on selling higher speed FiOS and U-verse bundled services, often at the expense of traditional DSL service."

The takeaway is that AT&T and Verizon might do well to drop basic broadband prices and try to pump up sales volume. While the companies have room to play with pricing, it may be a last resort move, says BMO Capital Markets-Canada analyst Peter Rhamey.

"It's easy to take prices down, but it's very hard to bring them back up," says Rhamey. "It's worth noting that [the telcos] stopped promoting their broadband plans in the second quarter because that's when students are leaving school and disconnecting ... it's a seasonal disconnect period. It's overly simplistic to say [broadband subscriber growth slowed down] because of this or that. Just a few years ago [the telecom providers] were criticized for offering $15 DSL service," says Rhamey.

Meanwhile, super-high-speed services still aren't widely available (or affordable), according to the Communications Workers of America. The trade group says the average U.S. internet speed was 2.3-megabits per second, up just .4 mbps from last year. Japan, by contrast, boasts average net speeds of roughly 63-mbps range.

Of course, the CWA has an agenda -- the group is pushing a piece of legislation called the Broadband Data Improvement Act, which would basically funnel government money into the hands of broadband providers, or in the words of the CWA, the legislation would create a "$40 million five-year matching grant program for organizations engaged in efforts to identify barriers to broadband adoption in their state."

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