CNet’s Marguerite Reardon reports that the FCC is citing cost as a major barrier to broadband adoption, and Wall Street Journal’s Amy Schatz reports something similar (FCC report here). The FCC is citing the $41/month average broadband cost as an obstacle, but broadband plans start as low as $15/month. So the 35% non-adoption rate seems to better attributed to misinformed non-subscribers and the effect of near-free local phone calling with dirt cheap dial-up services.
For example; Reardon reports that “The FCC said many people who cited price as a barrier were reluctant to answer follow-up questions about how much they were willing to pay for service. Of the people who did answer, the survey found that responses varied from $10 to $20 to $25 a month for service.”
So at $20 a month, many non-subscribers would in fact become subscribers. Yet if we do a Google search for broadband services, we see DSL services as low as $15 or $20 a month with nearly free setup so it would seem that many of these non-subscribers are simply misinformed about the cost of broadband.
These lower priced DSL services run at 768 kilobits per second (Kbps) raw sync rates which we’ll call 615 Kbps of data throughput (see explanation of sync versus data throughput), but that’s about 20 times faster than dial-up services which are probably good for 30 Kbps. Furthermore, broadband services are “always on” so that they’re available any time whereas dial-up services require about 30 seconds to establish a connection which makes people think twice whether they really need to use the Internet or not. The best aspect of broadband is that the phone isn’t locked up when on the Internet. Yet with these relatively blazing speeds and always on connectivity, many users remain on dial-up Internet services.
One of the reasons is likely to be habit and people get used to their current set up and they like it that way. It’s hard to believe, but touch tone phones can be purchased for $5 yet we still have people clinging to their rotary phones in the year 2010. That means our phone systems have to go to a great expense just to maintain legacy support.
Another reason is that the cost of dial-up Internet service is only $5 to $10 a month, and US residents have virtually free local calling whereas free local calling didn’t exist in many other countries. While that seemed like a great deal for American phone customers, it acts as a major barrier to US broadband adoption. The fact that dial-up could cost more than broadband in some countries really helped push broadband adoption. In the US, an additional $10 a month is enough of an impediment to keep a lot of Americans from subscribing to broadband.
Moreover, nearly all websites (non-video enabled) and search engines are usable on dial-up Internet service. This is due to the fact that good web design dictates high performance web pages that load in a few seconds for most broadband users, and due to the fact that website owners want to reduce the bandwidth load on their servers because server bandwidth is metered. That means a typical webpage that downloads in half a second on broadband (not including the few seconds of server delay) would download in 8 seconds on dial-up. Google’s search engine for example is highly optimized for blazing speeds on broadband and probably loads near instantly on dial-up Internet services. That means for most text and image based websites, dial-up Internet service will work well enough for some people to avoid paying an extra $10 a month. This reality is that applications are lagging broadband or even dial-up services in some cases and that’s cause enough for people to stay on dial-up or lower speed broadband services.
Video seems to be slowing changing this as more people are sending videos to each other. Grandma might be afraid of the computer, but she’s going to want to see her grandkids’ videos on Facebook or Youtube. Computers have also come way down in price where fully functional dual-core laptops with 15.4″ displays can be purchased for less than $400. Netbooks, iPads, and ARM based tablets that cost as little as $250 could fuel even more adoption especially if the devices are simpler to use and maintain. Lastly, many people who won’t touch a computer or broadband could end up being broadband users with their phone and wireless services. The future is difficult to predict, but we’ll likely see some radical changes within the next decade.