Broadband Technology

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BROADBAND TECHNOLOGY

Broadband technology refers to a high-speed, higher bandwidth connection to the Internet than is offered by a standard telephone line. The greater bandwidth of a broadband connection allows for more data to be transmitted at higher speeds than a conventional telephone line. While the definition of broadband data transmission rates vary, 144 Kbps (thousands of bits per second) represents a minimum broadband transmission rate, compared to 56 Kbps for a telephone modem. Unlike telephone line connections to the Internet, which typically involve dialing in to use the service, broadband connections are always on.

Broadband technology includes cable modem and digital subscriber line (DSL) connections to the Internet as well as a number of alternative technologies. DSL technology uses ordinary copper telephone lines to deliver a high-bandwidth connection to the Internet, with typical data transmission speeds ranging from 512 Kbps to 1.5 Mbps (millions of bits per second). However, DSL service requires a certain proximity to the DSL provider's central office, and DSL providers must set up many such offices to serve a large area. If a DSL subscriber was more than 20,000 feet from the central office of the DSL provider, then the service was typically unavailable.

Cable modems are the most popular broadband connection among consumers. To provide high-speed Internet access over cable lines, cable system operators have had to upgrade their systems and replace old one-way lines with lines that can handle two-way traffic. Alternative broadband technologies, mostly used by businesses, include leased lines, frame relay, fiber optics, asynchronous transfer mode (ATM), T1 and T3 lines, and integrated services digital network (ISDN). High-speed Internet access is also available through satellite services, although the number of subscribers remains small in comparison to cable modem and DSL subscribers.

According to a mid-2001 survey of consumer households from Kinetic Strategies, there were 7.6 million broadband subscribers in the United States and 1.7 million in Canada. Taken together, that represented 8.2 percent of all North American households. Among broadband subscribers, 70 percent or 6.4 million households connected to the Internet through a cable modem, while 2.9 million had DSL connections. In separate statistics, according to the Yankee Group, about 10 percent of U.S. households, or 5.4 million, had a broadband Internet connection at the end of 2000.

A mid-2001 report from Strategy Analytics predicted that by the end of 2001, 14.1 percent of all North American households would have a high-speed Internet connection. By 2005, the study predicted that 53 percent of North American households would have a broadband connection to the Internet. In Europe, by contrast, Strategy Analytics found that only 3.3 percent of all European households would have a high-speed Internet connection at the end of 2001. Within Europe, the rate of penetration varied significantly by country, with Sweden having the highest penetration at 9.4 percent, compared to the lowest rate in England of just 0.9 percent. Other countries surveyed included

the Netherlands, with 6.1 percent of all households having a broadband connection
Germany (4.8 percent)
Spain (3.6 percent)
France (2.0 percent)
and Italy (1.1 percent).

The percentage of households having a broadband Internet connection in 2004 was projected to increase dramatically in European countries, led by

Sweden with 37.3 percent
the Netherlands (33.9 percent)
Germany (27.4 percent)
France (22.6 percent)
Spain (21.9 percent)
the United Kingdom (19.5 percent)
and Italy (10.6 percent).

While broadband offers consumers many benefits, it appeared that its higher costs, relative to dial-up services, were hindering the rate of broadband adoption among consumers. In addition, there was no "killer application" to drive demand for broadband, particularly in the wake of Napster's demise as a free music-trading network. In other words, broadband to date offered no new abilities that dial-up users didn't already have, only the ability to do existing tasks faster and perhaps more reliably when large files were involved. Benefits such as being able to view streaming media better or download Web pages faster were often not enough to make consumers dissatisfied with a simple telephone line connection to the Internet. As of mid-2001, most U.S. broadband services to consumers were priced at more than $40 per month.

WHAT DO BROADBAND CONSUMERS WANT?

Studies indicate that speed is the primary motivation for having a broadband connection. As of mid-2001, broadband users tended to surf the Internet more and make more online purchases than narrow-band users, but otherwise their usage patterns were the same. A secondary reason for having a broadband connection was that it freed up the telephone line, while a third factor was that the connection was always on.

There is conflicting data as to whether or not broadband users are interested in enhanced and premium services, and whether they are prepared to pay for them. In general, fairly large segments of online users have some interest in premium services, but only a minority say they are willing to pay extra for them. A mid-2001 broadband study by Strategy Analytics found that while 60 percent of all U.S. households with broadband connections expressed a "general interest" in value-added services offered only with a high-speed Internet connection, that percentage dropped to 25 percent if there was a $5 to $10 monthly fee involved. Furthermore, only 16 percent of all U.S. broadband households were interested in the services if additional hardware and/or software had to be leased or purchased.

A mid-2001 study by BroadJump provided additional details. Similar to the other research, the Broad-Jump study showed that anywhere from 50 percent to almost 70 percent of broadband users expressed a general interest in certain applications and services, including virus protection, firewalls, streaming audio, and Internet telephony. When it came to paying for these benefits, though, the number interested dropped considerably:

virus protection (28 percent willing to pay)
firewall (26 percent)
Internet telephony (20 percent)
software rental (19 percent)
video on demand (19 percent)
instant messaging (16 percent)
streaming audio (15 percent)
and online gaming (12 percent).

Conversion rates from "general interest" to "willing to pay" were highest for software rental (75 percent conversion rate), followed by video on demand (60 percent), video conferencing (45 percent), firewall (42 percent), virus protection (41 percent), and Internet telephony (40 percent). Although video on demand had a high conversion rate, the BroadJump study revealed that users would prefer to view the videos on TV rather than on their computer. From the study it appeared that premium entertainment content was less important to U.S. broadband users than utility services.

BROADBAND FOR BUSINESSES

Broadband connections offer several benefits to business enterprises. The benefits include time savings, an "always on" connection to the Internet, and freed up telephone lines. Broadband facilitates greater information flow and communication within the organization as well as with clients and suppliers. It also enables companies to use rich media, such as streaming video and audio, to communicate with employees, while video conferencing can save on travel expenses.

According to a mid-2001 study on Internet connectivity by Insight Research, only 11 percent of small and medium-sized business enterprises (SMEs) had broadband connectivity. While DSL offered businesses a cheap alternative to leased T1 and T3 lines and provided more dedicated bandwidth than ISDN, DSL's distance limitations excluded many companies that weren't within its reach. For many DSL providers, it was not economically viable to add the extra equipment to central offices located outside of major metropolitan areas, thus leaving many areas without an affordable broadband alternative.

Several forecasts indicated that businesses would adopt broadband connections much faster than consumers in the early 2000s. Insight Research predicted that some 50 percent of U.S. small and medium-size businesses would have a broadband connection by 2005, while a study of businesses of all sizes by Jupiter Media Metrix forecast that nearly 100 percent of U.S. businesses would have a broadband connection by 2005. Globally, the number of broadband business connections to the Internet was projected to grow from about 5 million lines in 2000 to more than 16 million lines in 2004, based on a study by Ovum. In North America, the number of businesses with broadband connections was projected to grow from just over 1 million in 2000 to nearly 4 million in 2004.