Friday, April 13, 2018

Do You "Lack" a Tesla?

Do you “lack” a Tesla or a yacht? If so, should the government take action to allow you to fix that “lack?” That’s a silly analogy, but makes a point.

When a government report says 31 percent of residents lack a fixed network internet access service, all we know is that consumers do not buy a service. We do not necessarily know why that behavior exists, and there are many possible explanations.

When consumers do not buy a product they actually can buy, even an arguably valuable and, in some cases, essential service, there are potential problems.

Affordability is among the most-obvious concerns. Were the networks literally not built, that would be a problem, as that would prevent customers from buying. If potential customers did not know how to use the internet, that would be another type of issue.

But if consumers make rational choices not to buy a particular product, that actually is not an addressable “problem,” but an expression of consumer choice and freedom. There are many issues we ought to be concerned about. People making rational choices not to buy the particular expression of a product is not among those problems.

According to the report by the Mayor’s Office of New York City, about 12 percent of homes have no computing devices of any type in them. That would explain the “do not buy” (“lack”) situation. About 10 percent of homes report using mobile data, about one percent say they use dial-up access, while about three percent of homes say they could buy, but do not wish to do so.

With the caveat that use of broadband internet does correlate with income, education and use of computing devices, possibly 26 percent of homes that do not buy broadband have some plausible explanation. They do not wish to buy, use an alternative form of access.

As always, single-person households are least likely to buy broadband internet access services, suggesting the value-price relationship is most problematic in single-person households. Fully 42 percent of single-person households do not buy a fixed network broadband connection.

For households with at least two people, “not buying” happens in about 25 percent of households.

That is an illustration, in many cases, of wireless substitution, where customers make choices to rely on mobile service for voice, messaging and internet access.

Still, poverty and income are correlated with buying of broadband internet access. Using several indicators of “poverty,” between 20 percent to 28 of New York City households are defined to be “in poverty.”

Subsidized usage is among the tools to deal with the “cannot afford it” problem. But so are free Wi-Fi hotspots, mobile substitution and use of public library facilities.

Still, there are several issues, even there. Some households really do not wish to use the internet, and therefore will not wish to buy broadband, at any price. Others will rely on a mix of public resources, Wi-Fi hotspots, “use at school” and mobile substitution to meet their needs.

The point is that there are many reasons people “lack” fixed network broadband, and some of those problems cannot be easily fixed. Choice plays a part. Other resources play a part, as do subsidies. Lower prices, caused by competition, also play some part.

The point is that there are lots of reasons consumers do not buy particular communications products, and perceptions of value, compared to price, always matter. A majority of U.S. households no longer buy fixed network voice services. That generally is by choice. The product simply is not viewed as desirable, and there are other substitutes.

In the coming 5G era, the range and value proposition of new choices is likely to grow substantially.

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