more on Om Malik on: Shrinking consumer broadband choices?

[David Farber <dave () farber net>]

Begin forwarded message:

From: david.e.young () verizon com
Date: October 15, 2004 1:20:22 PM GMT+01:00
To: dave () farber net
Subject: Re: [IP] Om Malik on: Shrinking consumer broadband choices?


Hi Dave,

I'm sure you will not be surprised to see that I disagree with the 
assessment below on a couple levels.  First and most fundamentally, one 
of the reasons we have a lower percentage of broadband internet users 
in the US is because of the availability of very cheap dial-up internet 
access which was enabled by the fact that local telephone calls were 
'free' (i.e., not charged per minute of use).  If you look at many of 
the countries with the highest percentage of broadband users, you will 
frequently find that local phone calls are metered and dial-up internet 
access never took off.  The availability of reasonably priced broadband 
then is a no-brainer compared with expensive dial-up and you see the 
large majority of internet users in those countries choosing broadband.

In the US however, low cost dial-up is still a rational alternative for 
the most cost sensitive consumers.  Things like voice and video over IP 
which can be delivered inexpensively over broadband connections (but 
not over dial-up) is likely to tip the scales and accelerate the 
substitution of broadband for dial-up.

Regarding competition between the two primary broadband technologies in 
the US, there is no 'cozy duopoly' that I'm aware of.  I see intense 
competition with prices declining, speeds increasing and extra services 
added constantly.  For example, Verizon's entry-level DSL has gone from 
a 768k down and 128k up to 1.5M down and 384k up (double the 
downstream, triple the upstream).  At the same time, the price has gone 
from $60 per month when we first launched the service 6 years ago to 
under $30 per month today.  Likewise, cable has been forced to respond 
by raising speeds and lowering prices as well.  And we are now kicking 
up the competitive pressure on cable even more as we roll out fiber to 
the home to provide even higher speeds in both directions, the ability 
to provide true video competition for cable and a future-proof platform 
capable of delivering whatever speeds are eventually required by 
customer applications.

Finally, I see 50% internet penetration in the below $30k demographic 
as a very encouraging statistic. As stated before, dial-up is a 
rational economic choice in the US for the most cost sensitive 
consumers.  However, there are many barriers to internet access for 
many lower income families beyond the cost of broadband.  Computer 
ownership is a key gating factor, as are education and literacy. 
 Addressing those issues will be key to bringing on board the other 50% 
of lower income families.  

-David

--------------------------------
 David E. Young
 Director, Internet & Technology Policy
 Verizon Communications
 1300 I Street NW
 Washington, DC 20005
 +1 202-515-2425  <Office>
 +1 202-365-4755  <Mobile>
 +1 202-336-7923  <Fax>
 david.e.young () verizon com




"David Farber" <dave () farber net>
Sent by: owner-ip () v2 listbox com

10/15/2004 03:48 AM
Please respond to dave

       
        To:        "Ip" <ip () v2 listbox com>
        cc:        
        Subject:        [IP] Om Malik on: Shrinking consumer broadband 
choices?






 [Note:  This item comes from reader Robert Berger.  Actually, the ITU
 now rates the U.S. # 13 out of the top 15 countries in terms of
 broadband penetration.  DLH]

 > From: "Robert J. Berger" <rberger () ibd com>
 > Date: October 14, 2004 6:23:00 PM PDT
 > To: Dewayne Hendricks <dewayne () warpspeed com>, Dave Farber
 > <dave () farber net>
 > Subject: Om Malik  on: Shrinking consumer broadband choices?
 >
 > Shrinking consumer broadband choices?
 > http://www.gigaom.com/2004/10/shrinking_consum.php
 >
 > FCC's decision to extend monopolistic control over the last mile
 > has The Consumer Federation of America and Consumers Union all
 > riled up. They are worried that lack of competition will only
 > increase prices, limit choices, and result in slower
 > innovation. "The FCC today took our country one giant step
 > closer toward solidifying a two-company domination – the local
 > cable and telephone providers -- over the consumer Internet
 > market," said Gene Kimmelman, Senior Policy Director for
 > Consumers Union. "As both industries tighten their hold on
 > high-speed Internet (broadband) access, consumers will see their
 > choices diminish and their bills skyrocket." "This stranglehold
 > will stifle innovation as these duopolies discriminate against
 > unaffiliated applications and services that in the past have
 > driven the growth of the Internet and the boom in information
 > technology," Mark Cooper, Director of Research at the Consumer
 > Federation of America, said. "As a result, our country will fall
 > even farther behind Asia and Europe in broadband penetration."
 >
 > I agree. FCC is beholden to special interest groups, and has
 > lost all veneer of fairness. Michael Powell thinks that also-ran
 > technologies like WiMAX and Broadband over Powerlines will
 > result in competition, and once again shows that despite his
 > self professed love for gizmos, he really doesn't have a grasp
 > on technological realities. I think it is time that consumers
 > get to elect FCC commissioners, via the local ballet. No
 > political appointments for this most important body, which is
 > chartered with coming up with unbiased, fair and realistic
 > regulations that affect consumer lives in the future. I think
 > broadband and wireless networks are going to be a key to our
 > future and global competitiveness, and FCC is selling it down
 > the pike. Here is a recent FCC reality check:
 >
 >     • In the three and a half years that Michael Powell has
 >     been Chairman of the Commission, the U.S. had fallen
 >     from third to eleventh in broadband adoption.
 >
 >     • As a result, the digital migration that Chairman
 >     Powell has touted has become a migration to a massive
 >     digital divide. One out of every two American households
 >     with incomes above $75,000 have high-speed Internet
 >     connections at home. One-out of every two American
 >     households with incomes below $30,000 does not have any
 >     Internet connection at home at all.
 >
 >     • The cause of the failure of high speed adoption is
 >     clear, Americans are being overcharged by the cozy
 >     duopoly of cable and telephone companies. Cross national
 >     comparisons of price show that Americans pay fifteen to
 >     ten times as much, on a megabit basis, as consumers in
 >     Japan pay. Three years ago the price in America was
 >     three or four times as high.

 Archives at: <http://Wireless.Com/Dewayne-Net>
 Weblog at: <http://weblog.warpspeed.com>

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