Because every American
should have access
to broadband Internet.

The Internet Innovation Alliance is a broad-based coalition of business and non-profit organizations that aim to ensure every American, regardless of race, income or geography, has access to the critical tool that is broadband Internet. The IIA seeks to promote public policies that support equal opportunity for universal broadband availability and adoption so that everyone, everywhere can seize the benefits of the Internet - from education to health care, employment to community building, civic engagement and beyond.

The Podium

Tuesday, July 21

Global Broadband Boom

By Brad

A new report from Parks Associates finds that worldwide broadband adoption could potentially reach 650 million households within the next four years, and that the Asia-Pacific market will lead the charge with close to 50% of the global market share.

The report also cautions that service providers will have to continue investing heavily in their networks in order to keep up with the growing flood of online video and social networking applications.

Dear FCC…

By Bruce Mehlman

IIA has submitted its feedback to the FCC on the National Broadband Strategy. Below are some highlights.

Regarding the state of broadband access in America:

A large number of first-round comments to the Commission started from the premise that broadband in America is an unmitigated failure. We disagree. In roughly one decade our nation has gone from practically no broadband deployment or adoption to roughly 90% availability and 50% adoption. This is an astounding accomplishment. Indeed the Orszag Report found broadband usage in 2008 (66.6 million households) nearly six times that in 2001 (10.4 million households). Cross-platform competition continues to grow between wire line, wireless and cable offerings, with promising new technologies such as broadband over power lines emerging. Market players invest roughly $60 - $80 billion annually in infrastructure upgrade and expansion of footprints, with an even more robust and competitive market for online applications.

As for what the commission’s next steps should be:

Despite the thousands of pages of comments and years worth of reports, there is still plenty that we do not know. Through the broadband mapping, FCC surveys, upcoming Census Bureau efforts and private efforts such as Pew, we will continue to learn much more precise information about where broadband is and is not and who is adopting and who is not (and why). Preliminary actions should therefore focus first on what we do know.

We know roughly 10 million households have no broadband choices. As has been noted previously, the vast majority of Americans with no option for broadband Internet are those living in rural areas, where sparse population density and difficult terrain inhibit private investment. Initial efforts and investment by the government should address these market failures, catalyzing investment in unserved communities where private returns would not justify it. Societal returns from ubiquitous connectivity warrant some measure of public investment, though specific investments must always be weighed against alternatives for reaching other unserved users (such as digital literacy programs in urban centers).

We also know roughly 40 percent of households choose not to invest in broadband. They fail to see the value despite compellingly low connection costs, especially now in tough economic times.  That suggests the need for government efforts to promote digital literacy, lead by example in broadband-enabling government applications and educate consumers about the benefits and possibilities enabled by broadband Internet usage.

Read IIA’s full reply to the FCC (pdf).

Monday, July 20

Encouraging Statistics Show Broadband Adoption on the Rise

By Bruce Mehlman

The new study by former Clinton economist Jonathan Orszag presents some interesting facts and figures examining nationwide trends for adopting broadband Internet. 

Orszag found that the number of households adopting broadband Internet service has increased six-fold from just 10.4 million households in 2001 to 66.6 million households in 2008. Not surprisingly, a corresponding decrease in households with dial-up Internet was identified during the same period, falling from 44.2 million in 2001 to just 10.5 million last year. And the number of homes without Internet service has also declined from 53.6 million to 39.7 million.

While this extraordinary growth in broadband adoption is satisfying for advocates like me, it also reminds us that we have a great deal of work left to do because almost 40 million homes still have not signed up for any Internet service at all. Fortunately, Orszag’s study also demonstrates that Americans’ positive attitudes toward broadband Internet are aligned with its continued expansion, capacity and adoption.

These are encouraging signs, but we must persist in our efforts until broadband adoption rates approach 100 percent and reach every corner of the country. Broadband offers too many opportunities in education, employment, health care, information and entertainment to leave so many families without the service.

Broadband Fact of the Week

By IIA

Fact of the Week

The number of U.S. subscribers with broadband access on their smartphones and other devices has grown from 3 million in 2006 to 73 million in 2008.

Grant Gross, “US Broadband Ranking: Does it Matter?” NYTimes.com. June 5, 2009.

More facts about mobile broadband.

Friday, July 17

The Rewards of Logging On

By admin

Consumers, regardless of their financial situation, prize broadband. In fact, a study conducted by former Clinton NEC advisor Jonathan Orszag has found that consumers are using this technology to reap $30 billion dollars in benefits annually.

The report predicts those gains will increase as more people adopt broadband and more applications become available. Today, consumers use the Internet for buying and selling, accessing news and information, social networking and managing financial activities, among other pursuits. Future broadband-enabled technologies will dramatically increase health care applications and make election processes run smoother. Users will be able to access smart power grids via broadband, to help them monitor and reduce their energy usage.

Orszag’s research also showed that unemployed and retired households value broadband just as much as the employed and students.

Between 2001 and 2008, U.S. broadband households jumped from 10.4 million to 66.6 million, while dial-up users dropped from 44.2 million to 10.5 million. Homes with no Internet access at all numbered only about half that total, at 39.7 million.

And it’s only a matter of time before these households themselves discover the benefits of broadband.

Wednesday, July 15

IIA Guest Blog: Mark Dutz

By IIA

Our third, and final, guest post from the authors of the report “The Substantial Consumer Benefits of Broadband Connectivity for U.S. Households.”

Broadband as a household necessity: Data on households’ actual choices in the market are consistent with recent survey results

An April 2009 national survey by the Pew Research Center’s Social & Demographic Trends project asked what familiar household appliances Americans can’t live without. There were some striking re-evaluations, no doubt at least in part triggered by the belt-tightening effects of the recession. The proportion of Americans that considers a dishwasher or a cable or satellite TV as a necessity has dropped sharply since 2006, with dishwashers dropping 14 points with just 21 percent of Americans now rating it as a necessity, and cable or satellite TV dropping 10 points with just 23 percent rating it as a necessity. On the other hand, the public judgment about high-speed Internet actually increased, with 31 percent of Americans now considering it as a necessity, up from 29 percent in 2006.

This shift in consumer perceptions towards increasingly viewing broadband as a household necessity, based on what 1,003 Americans replied in telephone interviews, has now been confirmed and amplified by the Dutz-Orszag-Willig study, based on a much larger data set: the market choices of roughly 30,000 different heads of households, covering the type of Internet service (no home Internet, dial-up versus broadband connection) and the prices paid in the top 100 metropolitan regions across the U.S. over the period 2005 through 2008. Based on these data, the study finds that households are increasingly less willing to alter their broadband purchases in response to change in the broadband price.  This is what economists refer to as the “own-price elasticity of broadband”, and it actually progressively declines over time, from -1.53 in 2005 to -0.69 in 2008.  In other words, in 2005 a 10 percent rise in the overall price of broadband would have led to a 15.3 percent decline in the quantity demanded, but by 2008, a 10 percent rise in the price of broadband would lead to only a 6.9 percent decrease in the quantity of broadband demanded. This result indicates that broadband is progressively being perceived by those who are using it as a household necessity!

The full Orszag-Willig-Dutz study, “The Substantial Consumer Benefits of Broadband Connectivity for U.S. Households” is available here (PDF). Your can also read posts by study authors Jonathan Orszag and Robert Willig.

IIA Guest Blog: Robert Willig

By IIA

The Big Picture: Broadband’s Economy-wide Benefits

In our recent paper, “The Substantial Consumer Benefits of Broadband Connectivity for U.S. Households,” we find that household consumers receive roughly $32 billion of net benefits from the use of fixed-line broadband at home, up significantly from $20 billion in 2005. Since household broadband use has generated the majority of broadband revenues, focusing on household consumer surplus is certainly the most appropriate starting point for estimating the economy-wide benefits from broadband. Indeed, we are particularly proud of our use of both survey methods and demand estimation with different recent data sets to derive robust and consistent detailed measures of the contribution of home broadband to consumer welfare.

However, to fully understand the bigger picture, in terms of economy-wide welfare gains generated by broadband, it is important to take into account not just the impact of fixed-line broadband on household users but also the impact of wireless broadband services on all consumers, the impact on the economy from broadband use by businesses, and the impact on the economy from the business of providing broadband and broadband-related services. Taken together, it is clear that the overall benefits to the economy from broadband are significantly greater than the direct benefits experienced by households of $32 billion per year.

Wireless broadband, when used by both home-connected users and individuals with no home Internet connection, is valued because it facilitates similar benefits as those from home broadband, and also allows users to be mobile while offering extra services pertinent to mobile users. Without doubt, many Americans with mobile wireless service view it as a complement to home connectivity, adding value on top of that already received from their home connection. In addition, an increasing number of households with no home connection are using wireless broadband as a substitute for home broadband connectivity, thereby receiving all broadband value from their wireless connection. Certainly, these benefits of broadband to the economy are additional to the ones we have measured. For a recent discussion of some of these benefits, see “Accelerated Wireless Broadband Infrastructure Deployment: The Impact on GDP and Employment.” 

Many business users of both fixed-line and wireless broadband services generate significant increases in productivity from the use of broadband. A portion of these productivity gains are net benefits that are additional to the ones we have measured. As business users compete against each other, the forces of competition impel the pass-along of a significant portion of these productivity gains to households, whether in the form of innovative new products or lower prices for existing products. The remainder of these benefits, in the form of producer surplus and profits, will accrue directly to the stakeholders of these firms.

Finally, the provision of broadband services and value-added services via broadband to all households and businesses (as opposed to their use) also generates benefits in the form of producer surplus and profits. These benefits do not accrue to households in their capacity as users, but rather to all the stakeholders of the companies that have invested to provide broadband and value-added services.

The full Orszag-Willig-Dutz study, “The Substantial Consumer Benefits of Broadband Connectivity for U.S. Households” is available here (PDF).

IIA Video: Broadband Stimulus

By IIA

Craig Settles, President of Successful.com, discusses community broadband expansion and the long-term effects of planning around broadband stimulus money.

Tuesday, July 14

IIA Guest Blog: Jonathan Orszag

By IIA

Broadband Adoption: New Study Sheds Additional Light on Existing Survey Findings

Our study of the consumer benefits from home broadband connectivity provides a detailed breakdown of the demographic characteristics of home broadband users. It is helpful to compare our results, based on roughly 30,000 households per year across the top 100 metropolitan regions across the United States, over the period 2005 through 2008, with the results of the periodic surveys of the Pew Research Center’s Internet & American Life Project (see here and here). The Pew results are based on telephone surveys of 2,253 adults in April 2009, and 2,251 adults in April-May 2008.

The results are broadly similar. The population subgroups that have below average broadband adoption rates are:

Low-income Americans: According to the Pew surveys, respondents living in households with annual household income of $20,000 or less saw broadband adoption grow from 25 to 35% between 2008 and 2009. Our comparable 2008 figure for households with annual household income of $25,000 or less was 41%.

Senior citizens: Broadband adoption grew from 19 to 30% among adults ages 65 or older. Our comparable 2008 figure was 43%, statistically significantly lower than boomers (ages 45-64) at 69%, and younger households at 81-84%.

High-school graduates: Among adults whose highest level of education is a high school degree, adoption grew from 40 to 52%. Our comparable 2008 figure was 38% for adults with less than a high school diploma.

African Americans: Broadband adoption grew at a below average rate, increasing from 43 to 46%. Our comparable 2008 figure was 57%, statistically significantly lower than Latino/Hispanics at 74% and whites/Caucasians at 70%.

What’s new in our findings on this topic?

Given our larger sample size for each year, we separately break out Asians (South and South-East Asians) as a distinct race/ethnicity subgroup: 82% of Asians had adopted broadband by 2008.

For employment, we find that the likelihood of adoption increases with employment, with retired households being below average, and with subsequent higher levels of connectivity for the unemployed and part-time employed, and the highest levels of adoption by the full-time employed. Interestingly, we also find that people appear unwilling to cut their broadband even when they lose their jobs, based on their need for connectivity. This is reflected in the significant jump upwards in the use of job board and career information sites during the economic downturn.

Finally, we provide important comparisons between patterns of adoption and patterns of valuation of home broadband.

The full Orszag-Willig-Dutz study, “The Substantial Consumer Benefits of Broadband Connectivity for U.S. Households” is available here (PDF).

 

Monday, July 13

The Benefits of Broadband at Home

By Brad

A new study from Jonathan Orszag, Robert Willig, and Mark Dutz, finds that America consumers receive more than $30 billion in benefits each year from using broadband at home.

The study, entitled “The Substantial Consumer Benefits of Broadband Connectivity for U.S. Households,” shows that broadband Internet access is now considered a necessity by many American households, with strong benefits to U.S. consumers in the areas of education, health care, work, news, entertainment and civic affairs.

Among the other findings:

66.6 million households used broadband in 2008, an increase of six times the 10.4 million households that used broadband in 2001.

The number of dial-up users has decreased substantially, from 44.2 million households in 2001 to 10.5 million in 2008.

Households with no home Internet fell from 53.6 million in 2001 to 39.7 million in 2009.

The full Orszag-Willig-Dutz study is available here. And we’ll have guests posts by the authors throughout the week.

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