Broadband Adoption at Home:

Trends & Prospects

John B. HorriganFebruary 10, 2005

PURC Annual Conference:PURC Annual Conference:

Emerging Technologies and Emerging Technologies and TrendsTrends

Presentation Overview

Big picture on internet accessLatest in home broadband adoptionThe adoption environmentThe migration to broadband

Portraits of Access: end of 2002

Dial-up37%

High-Speed14%Work only

5%

Neither3%

Not Online41%

Portraits of Access: end of 2004

Dial-up26%

High-Speed27%

Work only4%

Neither3%

Not Online40%

Broadband at home, 2000-2004

0

10

20

30

40

50

60

Jun-0

0

Sep-0

0

Dec-0

0

Mar-

01

Jun-0

1

Sep-0

1

Dec-0

1

Mar-

02

Jun-0

2

Sep-0

2

Dec-0

2

Mar-

03

Jun-0

3

Sep-0

3

Dec-0

3

Mar-

04

Jun-0

4

Sep-0

4

Dec-0

4

Millio

ns o

f A

meri

can

s

Broadband at home – segments (April ’03 & Nov-Dec ’04 surveys)

67%

28%

3% 1%

47%

42%

5%

1%0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

2003 2004

Cable

DSL

Wireless

T-1

Types of Home High-Speed Connections (end of ’04)

53%

9%

1% 1%

35%

48%

41%

5%

0%

10%

20%

30%

40%

50%

60%

Cable DSL Wireless T-1/Fiber

Rural

Rest of Nation

Broadband at home – subgroups(% of all in group, end of 2004)

48%

27%

59%53%

0%

10%

20%

30%

40%

50%

60%

70%

College Grad --age 35 and

younger

Householdincome over

$75K

College Grads All

Broadband at home – regions (% with broadband of all in group, end of 2004)

15%

29% 30%

0%

5%

10%

15%

20%

25%

30%

Percent

Rural

Urban

Suburb

17

29

15

30

6

15 13

27

0

5

10

15

20

25

30

Urban Suburban Rural National avg

2002

2004

Broadband gaps over time (I)(% with broadband of all in group)

510

4

118

14 1218

12

25

17

32

23

4238

55

0

10

20

30

40

50

60

<$10k $20-$30K

$40-$50K

$75K-$100K

2002

2004

Broadband gaps over time (II)(% with broadband of all in group)

2004 data through June ’04

Availability

77% of Americans say broadband is available where they live– 8% say it’s unavailable– 15% don’t know

Rural gaps– 27% of rural dial-up users say it’s not available– 11% of non-rural dial-up users say it’s unavailable

Overall, 14% of dial-up users say broadband is unavailable where they live

– All data on this slide from October 2002 survey

Adoption environment: price, service providers

Among those with broadband or who know it’s available where they live:

– 61% say they have more than one service provider– 17% say they have a single service provider– 22% don’t know

Price (I)– $38.50 for those with > 1 service provider– $42.80 for those with a single service provider

Price (II) – average monthly broadband price=$39– $38 for DSL users– $41 for cable modem users

Data on this slide from February 2004 survey

Adoption environment: who wants it?

Of dial-up users, in Feb ‘04: – 40% say they want broadband– 58% say they don’t want it

In Oct ’02, of dial-up users:– 38% say they want broadband– 57% say they don’t want it

Home broadband growth from 10/02 to 2/04:– 24% 42%

Adoption environment: changing user preferences?

Puzzle – Size of dial-up pie shrinks, but share of dial-up who want

broadband stays about the same. What gives?

– Probably because some dial-up users who in ’02 said they didn’t want broadband do say this in ’04 approx 10%-15% do.

Why?– People do more things & spend more time online the longer

they’ve been internet users.– This changes the online time preferences of dial-up users.

Evidence: online experience and intensity of use

Average number of years online for dial-up users who want broadband:– 6.2 years

Average number of years online for dial-up users who do not want broadband:– 5.3 years

Average number of years online …– Broadband users = 7.0– Dial-up users = 5.7

What drives intensity of internet use?

Measures of intensity of internet use:• Probability of logging on, given day• Amount of time online, typical day• Number of online activities, given day

Largest independent predictor:• Having a home broadband connection• Number of years online

Between 1-2 years of online tenure will boost time online/number of activities just as much as a high-speed connection at home

Time online per day -- by type of connection & online experience (June 2003 data)

83

94

107

60

70

80

90

100

110

Minutes Online, average day

Novice DialupVeteran DialupBroadband (all)

Reasons for switching to broadband at home (Feb ’04 data)

Connection too slow 36%

Want to download files faster 21

Job-related tasks 10

Want “always on” 7

Want to use phone/net same time 7

Higher quality connection 5

Easier access to entertainment 4

Responded to promotion 3

Price fell to affordable level 3

What does this mean?

People’s online time preferences change with experience.

– Dial-up becomes a hassle as people do more things online This changes the value proposition of being online

– The bits per buck calculation: 200 bpm/$20 = 400bpm/$40

Upshots: Broadband is a good deal for experienced dial-up

users when they reach a certain point in the evolution of their online behavior.

Price points may not be not a big part of the calculation

What does this mean for future adoption?

Uptake has been very fast, notwithstanding the #11 world ranking for the U.S.

Work to be done to close availability gaps Is it possible to change users’ online time

preference?– Yes, online content becomes more compelling– So far, though, evidence shows a single application

doesn’t drive switch to broadband– High-speed users do more of everything, not more

of one thing

Notes

Except where noted, data used here is from the Pew Internet Project’s national random digit dial telephone survey in Nov-Dec 2004 of 3,114 Americans.

The Pew Internet & American Life Project is a project of the Pew Research Center

Contact me at: jhorrigan@pewinternet.org