The FCC cleared the way for broadband over power lines, but even without it, broadband penetration is growing. The phenomenon has major implications for marketers.
The idea of ubiquitous broadband may have came a step closer to reality this week when the Federal Communications Commission (FCC) cleared the way for commercial deployment of broadband over power lines (BPL).
"We talk so often about competition -- well here it is," said FCC Chairman Michael K. Powell. "All economists will tell you that magic happens when you find a third way. BPL provides us with a potential new competitor in the broadband market."
The idea behind authorizing BPL is two-fold -- to make broadband available in rural places that are not currently served by cable or DSL, and to increase competition in areas that already have broadband access. And broadband enables more than just rich media ads and entertainment, according to Todd Herman, MSN's streaming media evangelist.
"With this ruling, the FCC shows that it recognizes how important this is for commerce. What's driving the desire for broadband is the desire to have a connection that's always on. An always-on connection in a household is going to drive commerce in this country, and the FCC clearly recognizes that," Herman said.
Herman believes broadband drives consumer control over media. According to Herman, marketers need to recognize the consumer's desire to control, condense and combine programming, and look for opportunities to provide content that consumers aren't getting elsewhere, instead of just putting TV ads online.
"It's going to be good for all marketers, but it's going to be great for savvy marketers," Herman said.
Herman suggests savvy marketers might put out long-form video about complicated tech-oriented products nearing the holidays, to explain to potential buyers how they could use a product in their own life; or a five-minute video about choosing wine for Thanksgiving dinner.
Like many media watchers, Herman believes broadband is going to drive device-based fragmentation. Instead of the number of media choices being defined by the hours in the day times the number of channels, there is an added multiplier of devices, each with the ability to time-shift. What once would be seen by all viewers in a single :30 spot could now be seen over the course of a day or a week.
"Concurrency is dying. TV is not dying; TV is alive and well. Concurrency is dying, and broadcast models are all built upon concurrency -- people doing the same thing at once. That fact of American life is leaving us, and it's driven by devices," Herman said.
Others, like JupiterResearch analyst Joe Laszlo, are skeptical about BPL, but he still feels ubiquitous broadband is nearing reality.
"I'm massively skeptical about it [BPL]," said Laszlo. "I honestly don't think it's going to change the broadband landscape in the United States, except in a few very limited, very specific markets. There have been trials around the country, and around the world, that have proven that BPL is either not cost-effective, or causes too much radio interference. Just because the FCC gives its blessing to something that works in theory doesn't mean it's going to work in practice."
Most power companies would face hefty outlays to update their network infrastructure for BPL, as well as challenges in routing data signals around cross-connects and transformers in the complex power grid to keep the signals pure, he said. On top of that, there are widespread concerns about interference BPL can cause to radio signals used by local emergency services, amateur radio operators, and even cell phones.
Still, Laszlo said there are plenty of other reasons to be optimistic about broadband penetration in the U.S. "There's a lot of enthusiasm in the industry. People define 'critical mass' differently, but that's a phrase I'm hearing more and more in reference to broadband," he said.
More important to broadband's growth than the availability of a new and experimental technology like BPL is the spread of the leading one: DSL. The top national DSL providers are getting closer to full availability within their markets, Laszlo said.
SBC, which serves about one-third of U.S. households, is closing in on 100 percent availability of DSL to its customers, while Verizon and Bell South are in the 80 to 90 percent range, according to Laszlo. Qwest, the other major provider, faces more challenges, since its coverage area tends to include more rural areas, he said. Cable modem availability is generally above 70 percent, Laszlo said.
Research suggests the number of broadband users has topped 123 million globally, with DSL accounting for nearly two-thirds of those users. In the U.S., at-home penetration is at or near 50 percent. JupiterResearch puts the figure closer to 37 percent, with DSL or cable modems in 26.8 million U.S. households at the end of June; and expects 90 percent penetration by 2007, Laszlo said.
Recent competition for subscribers between cable and DSL providers has heated up, leading to a drop in prices overall and the proliferation of tiered pricing structures. With DSL providers like SBC and Verizon offering a level of service priced under $30, consumers are more inclined to make the switch, Laszlo said.
Among key consumers, broadband is very pervasive, according to research from MSN and Odyssey LP. "The groups most likely to have broadband are the groups most attractive to advertisers. For a 60-year-old person, it hasn't reached that level of need, but if I'm in an area without broadband, I don't log on," Herman said.
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