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Broadband Adoption at Home in the U.S: Growing But Slowing

Broadband Adoption at Home in the U.S: Growing But Slowing. John B. Horrigan Presented at “Internet Use in the Americas” workshop Mexico City June 2005. Presentation Overview. Big picture on internet access Trends in home broadband adoption The adoption environment for broadband Price

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Broadband Adoption at Home in the U.S: Growing But Slowing

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  1. Broadband Adoption at Home in the U.S: Growing But Slowing John B. Horrigan Presented at “Internet Use in the Americas” workshop Mexico City June 2005

  2. Presentation Overview • Big picture on internet access • Trends in home broadband adoption • The adoption environment for broadband • Price • Availability • Preferences of dial-up users • The migration to broadband • Policy implications • All data, except where noted, from national random digit dial telephone surveys of U.S. residents 18 & older conducted by Pew Internet Project

  3. Operating assumption • Encouraging high-speed internet adoption is a worthwhile policy goal • Lots of social benefits • Civic engagement & political knowledge • Informational benefits with respect to health care, government transactions, consumer information • Social connectedness • Good for business • Lower transaction costs • Sell gadgetry

  4. Percent of adult U.S. residents with internet access, 2000-2005

  5. Portraits of Access: end of 2002

  6. Portraits of Access: March 2005

  7. Broadband at home, 2000-2005

  8. Fast broadband adoption – compared with penetration of other technologies

  9. Broadband at home – segments (April ’03 & Nov-Dec ’04 surveys)

  10. Broadband at home – regions (% with broadband of all in group, March 2005)

  11. Broadband gaps over time (I) (% with broadband of all in group)

  12. Broadband gaps over time (II) (% with broadband of all in group) 2004 data through June ’04

  13. Adoption environment: availability • 77% of Americans say broadband is available where they live • 8% say it’s unavailable • 15% don’t know • Rural gaps • 27% of rural dial-up users say it’s not available • 11% of non-rural dial-up users say it’s unavailable • Overall, 14% of dial-up users say broadband is unavailable where they live • All data on this slide from October 2002 survey

  14. Adoption environment: price, service providers • Among those with broadband or who know it’s available where they live: • 61% say they have more than one service provider • 17% say they have a single service provider • 22% don’t know • Price (I) • $38.50 for those with > 1 service provider • $42.80 for those with a single service provider • February 2004 survey

  15. Adoption environment: price • Price (Feb. 2004) – average monthly broadband price=$39 • $38 for DSL users • $41 for cable modem users • Price (Oct. 2002) – average monthly broadband price=$38

  16. Adoption environment: who wants it? • Of dial-up users, in Feb ‘04: • 40% say they want broadband • 58% say they don’t want it • In Oct ’02, of dial-up users: • 38% say they want broadband • 57% say they don’t want it • Home broadband growth from 10/02 to 2/04: • 24%  42% • Not a lot of evidence of dial-up users more urgently wanting to switch to broadband

  17. Are new users getting broadband? • Not at a great rate • Share of new internet users who have broadband at home = 23% • New users  online for a year or less • Nov04-March05 data • Compared with 50% average • From a small & shrinking pool • 6% of internet users online for a year or less (March ’05) • 21% ofinternet users online for a year or less (Jan ’02)

  18. Reasons for switching to broadband at home (Feb ’04 data)

  19. Interim recap • Broadband growth has been quick, despite little change in prices • But lots of people still say they don’t really want it. • Growth in online penetration flattening in U.S. • Some availability gaps in U.S., especially rural areas. • Suggests that broadband adoption may not be on smooth upward path in U.S.

  20. The migration to broadband • People’s online time preferences change with experience. • Dial-up becomes a hassle as people do more things online  and people do more things online & spend more time on the internet with more online experience irrespective of type of connection • This changes the value proposition of being online • The bits per buck calculation: • 200 bpm/$20 = 400bpm/$40 • Upshots: • Broadband is a good deal for experienced dial-up users when they reach a certain point in the evolution of their online behavior. • Price points may not be not a big part of the calculation

  21. Time online per day -- by type of connection & online experience(June 2003 data)

  22. Model of broadband adoption peer-to-peer gaming politics research for job banking blogs own web site virtual tour health care search engine government website buy a product travel information High speed email news Dialup Rural wall Time spent online 2 Time spent online 1 Cost of broadband Cost of broadband

  23. To get lots of people to switch to broadband, you want … • Pool of experienced dial-up users to be: • Large • Relatively heavy users of the internet • Online experience to have a large impact on intensity of internet use • I will suggest that the effect of online experience on intensity of internet has declined over time

  24. Experienced dial-up users – millions who have been online 6 or more years

  25. Number of online activities(typical day)

  26. Amount of time (in minutes) spent online, average day, experienced dial-up users (those online 6 or more years) v. broadband

  27. Declining magnitude of online experience on intensity of internet use: multivariate analysis • Want to disentangle effect of broadband use & online experience on two measures of intensity of internet use: • Time spent per day online & number of internet activities • Must deal with causality • Preliminary results using 2SLS • Online experience & broadband had about same effect on intensity of use in 2002 • Broadband’s impact was about 5 times that of online experience in 2005

  28. Discussion • Results not too surprising in some respects • Gotten the “low hanging fruit” of early adopters • But . . . • Apparently not growing new fruit to harvest • And one could imagine alternative adoption patterns by which … • Overall internet penetration increased faster in past few years • Price drops – or other factors such as network effects, or “killer aps” – drove more people to broadband • Faster networks made switching to broadband more attractive to users (i.e., counteracts diminishing “onlnie experience effect”).

  29. Upshot • Fewer engaged dial-up users suggests ground isn’t fertile for lots of switching from dial-up to broadband • Tepid internet growth in recent years means soil isn’t being replenished with new dial-up users • Little evidence of new users signing up with broadband de novo

  30. Summing up • There are policy implications!!! • Universal service, however defined, still relevant • “Help” programs for low-income users? • Not a lot of political support presently in U.S. • Direct subsidies? • No political support in U.S. • State or Local initiatives? • Promising, especially municipal broadband initiatives • Close availability gaps

  31. Thank you! John B. Horrigan jhorrigan@pewinternet.org Pew Internet & American Life Project 1615 L Street, NW Suite 700 Washington, DC 20036 202-419-4500

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