Growing Broadband Market Could Lift Economy

The number of worldwide broadband Internet subscribers will reach more than 15 million in 2001 and more than 30 million in 2004, according to a report from Multimedia Research Group, Inc (MRG). An additional 24 million have broadband access through office LANs.

While cable broadband Internet is likely to stay ahead of DSL in the United States, DSL is likely to pass cable in global broadband markets. In North America, massive last-mile upgrades for cable broadband have continued on schedule in 2001, in contrast to last-mile infrastructure pullbacks by large U.S. telcos.

“This pull-back can be very dangerous for the big telcos, because large (and well-run) cable companies like Comcast and AOL/Time Warner can stay ahead of DSL and steal some voice business as well,” said MRG CEO, Gary Schultz. Satellite and MMDS broadband also are poised to provide new threats to telco-dominated DSL.

The report also predicts the increase in broadband will help increase the market for IP (streaming) media servers and storage, which are currently at $3.2 billion worldwide, with a forecast of over $5 billion in 2004. Continued growth in streaming is driven mainly by demand for high-speed (broadband) Internet, by high expectations of broadband users and by big advances in corporate use of streaming.

“The Internet is real and will not go away,” said MRG analyst, Krista Christian. “Streaming also is a real outgrowth of the high broadband demand and of well-run media companies and departments with business models far more robust than the dot-coms.”

A survey from MeasureCast, Inc. found that 17 percent of streaming media users have listened to or watched streaming audio or video 20 hours or more during the past 30 days.

MeasureCast randomly selected 250 people from its panel of more than 50,000 streaming media consumers. More than half the respondents (63 percent) said they accessed streaming media for more than 30 minutes (30 minutes to 20 hours or more) in the past 30 days.

One-fifth said they accessed streaming media for 5 to 30 minutes during the same period. The survey also reveals that 51 percent of respondents access streaming media “most often” from their home computers, while 40 percent do so from work. MeasureCast’s online listening reports show that although fewer people access streaming media from work, their listening/viewing of streaming media is more than double that of those that listen from home.

More than half (60 percent) of respondents said they have broadband access to the Internet, including T1 or T3 lines (22 percent), cable modems (17.6 percent), ADSL/DSL (16.4 percent) and ISDN lines (4.4 percent). More than one-quarter (27 percent) of respondents accessed streaming media with connections of 56K or slower.

While Internet radio fans can choose from thousands of stations, 32 percent of respondents said they listened to 2-to-3 online radio stations in the past 30 days, and 16 percent said they listened to only one station. Nearly 6 percent listened to 6 to 10 stations, and 4 percent listened to 11 or more streaming radio stations.

As for their 2000 annual household income, 18 percent of streamers said they earned between $50,000 and $74,999. Less than 20 percent (18 percent) earned between $35,000 and $49,000, and 16 percent brought home between $25,000 and $34,999. At the upper end of the scale, 2 percent earned between $150,000 and $199,000.

More good news for broadband, its users and even the economy, is presented in a study by Brookings Institution economist Robert Crandall and engineering consultant Charles Jackson, which projects that an acceleration of widespread broadband use could benefit U.S. consumers and producers by as much as $500 billion.

“Our study suggests that the benefits to U.S. consumers could eventually be upwards of $300 billion per year and that producers could reap another $100 billion per year if broadband were to be as prevalent as ordinary telephone service today,” Crandall said. “And that could be a conservative estimate. Because we cannot easily foresee all of broadband’s potential uses — in healthcare, for example — we may have underestimated its potential.”

The study assesses the consumer and producer gains from broadband use using several different lenses, assuming a low-estimate of 50 percent broadband penetration and a high-estimate of 94 percent penetration — a number that mirrors the percentage of U.S. households with telephone service.

“These large estimates of the potential value of broadband Internet connections can only be realized if a very large share of households have broadband connections,” Crandall said. “At present, fewer than 8 percent of households have broadband service; therefore, many of the valuable applications have not yet been developed.”

The study identifies five areas or activities that are likely to drive these consumer benefits: home shopping, reduced commuting, entertainment services, conventional telephone services and telemedicine.

“Clearly, the impact of broadband by any measure — in terms of GDP, jobs, U.S. productivity and efficiency — will be profound,” Jackson said. “We’re looking at a transformative technology: one that doesn’t just create change at the margins of an economic system, but at its core.”

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