Universal broadband: when and for how much?

Created by Wendy Wigen (EDUCAUSE) on September 1, 2009

If current broadband adoption trends continue in the United States, we will achieve 99% penetration of broadband by 2016. But there is a catch. The Internet is changing. New video-based content demands bandwidth levels that will require upward of a $300 billion investment in improved infrastructure. Assuming we want to meet this demand, who is going to pay? That was the thesis upon which the study, “Towards Universal Broadband: Flexible Broadband Pricing and the Digital Divide” is based.

On September 1, Dr. Robert Shapiro introduced this new study (co-authored by Dr. Kevin Hassett) with a straightforward discussion of their research findings. In order to achieve ubiquitous broadband adoption, disparities caused by race, geography and household income must be eliminated. Yet, the price increases that are necessary to pay for new infrastructure only exacerbate this digital divide.

The study compared two pricing models: the current pricing structure which is basically a flat rate monthly fee, and a flexible, or tiered, pricing model based on usage. Using an “all-you-can-eat” restaurant as an analogy, Shapiro explains how raising prices for all customers to pay for improvements needed by the heavy users will slow the adoption at the other end of the spectrum… the low end user. The author’s conclusion is that, if our public policy is to reach a state of ubiquitous broadband adoption sooner rather than later, then we should adopt a flexible pricing model that will continue to attract the low-end user while still providing the improvements needed for the high-end user.

Of course there are other ways of attacking this issue as well. The EDUCAUSE paper, A Blueprint for Big Broadband advocates government matching funds to offset the capital needed to build advanced networks. This infusion of money would be tied to a requirement to keep prices “affordable” and to keep networks “open” and therefore is not attractive to many of the larger network operators. However, with 2200 applications for the first round of funding in the recent broadband stimulus program, it still seems to be a viable alternative. The problem for the EDUCAUSE community in a tiered or flexible pricing proposal is that we are the heavy users.

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		Universal broadband: when and for how much? Created by Wendy Wigen (EDUCAUSE) on September 1, 2009 If current broadband adoption trends continue in the United States, we will achieve 99% penetration of broadband by 2016. But there is a catch. The Internet is changing. New video-based content demands bandwidth levels that will require upward of a $300 billion investment in improved infrastructure. Assuming we want to meet this demand, who is going to pay? That was the thesis upon which the study, “Towards Universal Broadband: Flexible Broadband Pricing and the Digital Divide” is based. On September 1, Dr. Robert Shapiro introduced this new study (co-authored by Dr. Kevin Hassett) with a straightforward discussion of their research findings. In order to achieve ubiquitous broadband adoption, disparities caused by race, geography and household income must be eliminated. Yet, the price increases that are necessary to pay for new infrastructure only exacerbate this digital divide. The study compared two pricing models: the current pricing structure which is basically a flat rate monthly fee, and a flexible, or tiered, pricing model based on usage. Using an “all-you-can-eat” restaurant as an analogy, Shapiro explains how raising prices for all customers to pay for improvements needed by the heavy users will slow the adoption at the other end of the spectrum… the low end user. The author’s conclusion is that, if our public policy is to reach a state of ubiquitous broadband adoption sooner rather than later, then we should adopt a flexible pricing model that will continue to attract the low-end user while still providing the improvements needed for the high-end user. Of course there are other ways of attacking this issue as well. The EDUCAUSE paper, A Blueprint for Big Broadband advocates government matching funds to offset the capital needed to build advanced networks. This infusion of money would be tied to a requirement to keep prices “affordable” and to keep networks “open” and therefore is not attractive to many of the larger network operators. However, with 2200 applications for the first round of funding in the recent broadband stimulus program, it still seems to be a viable alternative. The problem for the EDUCAUSE community in a tiered or flexible pricing proposal is that we are the heavy users. Washington Update \| flexible pricing \| Hassett \| Shapiro \| tiered pricing \| universal broadband Wendy's blog Login or register to post comments 121 reads
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