The combination of the severe recession and Congress’ requirement for the FCC to devise a National Broadband Strategy provides an excellent opportunity to inventory not only weaknesses, but also the many strengths, of the broadband sector and economy. Comprehensive analysis shows much that is going well that mustn’t be taken for granted in any new broadband plans. Unlike many other sectors of the economy, the American broadband sector is:
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An exceptionally strong foundation to build upon;
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On the right track with much positive momentum; and
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Partnering to solve many of society’s most pressing problems.
I. Strong Foundation to Build Upon
America’s competitive broadband market has an exceptionally strong foundation of positives on which to build upon, enhance, expand and supplement.
Financial/economic stability: The American broadband sector is an exceptional relative oasis of financial stability and economic strength in the U.S. economy. While not unhurt by the recession, the sector is still solidly growing and significantly out-performing the broader economy. There are several reasons for the broadband sector’s relative economic strength.
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Consumer demand for broadband/communications remains relatively strong since broadband generally is viewed as a necessity at home and in the workplace, and is viewed as a crucial connection to the marketplace for those seeking employment or new business.
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The broadband sector also has rational and healthy technology-platform competition based on real market economics, which makes the sector exceptionally efficient, resilient and sustainable.
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Demand-driven progressive pricing and usage thresholds ensure that those who want the fastest speeds and use the most capacity pay more to help fund the cost of increasing the Internet’s overall capacity.
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Demand-driven progressive pricing also keeps the vast majority of users’ prices low, because most are lower volume users.
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The relative predictability and rationality of market-based competitive economics and return on investment has afforded the private sector the necessary incentives to continue to invest more than most any other infrastructure-based sector, roughly $50-60b annually.
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Finally, the U.S. broadband sector learned its debt lesson after the tech bubble and cut debt roughly in half to reach historically-responsible levels. Consequently, the sector generally has strong balance sheets, which is enabling companies to continue to invest through the recession.
In short, the U.S. broadband sector, if unimpeded, is, and can be, one of the primary economic engines that will help pull the rest of the American economy back to recovery.
Diversity of Choice: The competitive broadband system in the U.S. produces a wide diversity of choice of technology platforms, business models, prices, speeds, products and services, because competitors are able to respond to Americans’ wide diversity of needs, wants and means. Moreover, the market-based freedom in the U.S. to: experiment, innovate, invest, compete, price and bundle creatively and flexibly make the U.S. broadband economy the most diverse and vibrant in the world.
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For example, Americans enjoy the wide variety of choice that results from having: the most free WiFi hot spots in the world; several inexpensive alternatives for dial-up Internet access (for the significant portion of Americans that surveys say only want dial-up for now); and a wide variety of broadband prices, speeds, usage models, for light to moderate to heavy to extreme bandwidth users.
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Furthermore, competitive broadband trends continue to create even more market niches, further increasing the sector’s diversity of choice.
Like America, the American broadband economy is exceptionally diverse and not at all monolithic.
Responsiveness: Technology platform competition in capital-intensive industries produces a very consumer-friendly and responsive marketplace. Since the marketing and operational costs of acquiring a new customer are so high in relative and absolute terms, existing customers have a lot of leverage and routinely benefit from a myriad of value enhancements designed to keep customers happy. Broadband customers routinely get more speed for the same price and are offered a variety of additional features, products and services for free or at a deep discount. Because competitors want to avoid the dreaded high cost of losing a customer, or “churn,” competitors increasingly anticipate consumers’ needs, and adapt to meet consumers’ ever-evolving needs and wants.
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Moreover, the diversity of choice in offerings enables competitors to be responsive to consumers needs in this recession to save money, by enabling them to spend less on lower priced bundles or to eliminate individual communication services entirely.
Resiliency: Another powerful benefit of the true technology-platform competition that exists in most of the U.S. is that network reliability is essential to avoid expensive churn. Another advantage to the economy that technology-platform competition has over monopoly-resale environments is the relative resiliency of infrastructure redundancy. All of America’s cybrastructure eggs are not in one basket.
American Competitiveness: While the OECD’s data on broadband penetration suggest U.S. deficiencies on that measure, it is important that any national broadband strategy to improve upon that measure does not inadvertently harm other measures at the same time where the U.S. is strong, on the right track or the world leader. In colloquial terms, it is important to not throw the baby out with the bathwater.
There is substantial independent evidence that the U.S. broadband sector has a strong foundation to build upon. No less than seven independent studies conclude that America is at, or near the top, in worldwide competitiveness in the converging sector of Internet, broadband, communications, and information technology.
