The Many Paradoxes of Broadband
Andrew Odlyzko
Digital Technology Center, University of Minnesota,499 Walter Library, 117 Pleasant St. SE,Minneapolis, MN 55455, USA
odlyzko@umn.eduhttp://www.dtc.umn.edu/
∼
odlyzkoRevised version, July 15, 2003
Abstract.
There is much dismay and even despair over the slow pace at which broadband is advanc-ing in the United States. This slow pace is often claimed to be fatally retarding the recovery of theentire IT industry. As a result there are increasing calls for government action, through regulationor even through outright subsidies.A careful examination shows that broadband is full of puzzles and paradoxes, which suggestscaution before taking any drastic action. As one simple example, the basic meaning of broadband isalmost universally misunderstood, since by the official definition, we all have broadband courtesy of the postal system. Also, broadband penetration, while generally regarded as disappointingly slow, isactually extremely fast by most standards, faster than cell phone diffusion at a comparable stage.Furthermore, many of the policies proposed for advancing broadband are likely to have perverseeffects. There are many opportunities for narrowband services that are not being exploited, some of which might speed up broadband adoption.There are interesting dynamics to the financial and technological scenes that suggest broadbandaccess may arrive sooner than generally expected. It may also arrive through unexpected channels.On the other hand, fiber-to-the-home, widely regarded as the Holy Grail of residential broadband,might never become widespread. In any case, there is likely to be considerable turmoil in the tele-com industry over the next few years. Robust growth in demand is likely to be combined with arestructuring of the industry.
1 Introduction
Broadband was the mantra of the dot-com and telecom booms, and is being offered as a magic elixir forcuring the woes of the high tech sector. Once American businesses and households have high speed links tothe Internet, the claims run, they will open up their wallets and buy new software and hardware from Cisco,Intel, Microsoft, and numerous other suppliers. That will then lead to a revival of the entire informationtechnology (IT) industry and spur faster growth of the general economy. There is even a school of thoughtthat claims the dot-com and telecom booms ended in crashes only because the telecom industry did notdeliver broadband access to the home. Three samples of recent calls for action to deliver broadband quicklyare [28,36,69].One paradox, an inconvenient one for broadband enthusiasts, is that while there is extensive moaningand groaning about slow deployment of this new communication service, broadband was already availableto the vast majority (well over 80 percent) of American households by 2001. Yet only about 10 percent of those households had chosen to subscribe by year-end 2001 [19,23]. Thus, as is increasingly being recognized(cf. [19,70]), it is adoption, not deployment, that is the issue. At year-end 2001 there were 12.8 millionbroadband lines in the U.S. according to FCC statistics [23] (with broadband defined as offering a speedexceeding 200 Kb/s in at least one direction). At the same time, there were 128 million cell phones in theU.S. [13]. The average monthly fees for wireless telephony and broadband are comparable ($40-50). So herewe had a population that was voting with its wallets 10:1 in favor of cell phones over broadband. Somehowall those promises of a glorious future of telecommuting, telemedicine, and distance learning failed to swaythe citizenry, and they opted to spend their money for mundane voice calls over a narrowband channelwith lousy quality. Mobility seemed to trump broadband.
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