Wednesday, August 12, 2009

Will Broadband Stimulus Work, If So, How Well?

An argument can be made that the "broadband stimulus" program, which has yet to award its first funds, will change very little. Most people who use the Internet already buy broadband services.

People in "underserved" areas might already have several providers (wired and by satellite and terrestrial broadband); the real barrier being lack of PCs, lack of training or simple lack of interest.

In rural areas, there are perhaps hundreds of thousands of locations with no terrestrial access at all, though satellite service might be available. An argument easily can be made that funds should be focused on locations that literally have no terrestrial access at all.

But those locations will be expensive to reach, meaning fewer households will benefit.

Also, building facilities will only improve broadband usage to the extent those new locations have consumers who want to buy broadband. A good percentage will not want to, because they don't use the Internet, do not own computers or cannot afford the incremental cost of broadband service.

That said, even if funds are targeted very precisely, overall broadand usage in the U.S. market will not change much, if only because the number of new subscribers in rural areas will, by definition, be limited. Even in most rural areas, an overwhelming majority of locations already are reached by one or two wired networks, plus satellite and terrestrial broadband in many cases.

The number of truly isolated locations is quite limited, in comparison to all U.S. locations and current broadband subscribers.

Good policy reasons underpin the drive to connect the unconnected. But a "passing" (facilities are in place) is not the same thing as "a user" (a household that buys service). It's good to build facilities to isolated locations. But that doesn't mean people always will buy, or that the number of new subscribers will move the needle.

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