Carrier Evolution

One doesn’t hear quite so much about “digital divides” as was common a decade ago. One suspects that is because the supply of communications, both voice and data, is a problem the world seems capable of solving.

Some of us can remember great “handwringing” an concern in international policy circles about how to bring telephone service to two billion people who never had made a phone call. You don’t hear such concern anymore, since we rapidly are solving that problem with mobile communications, a solution not envisioned in the 1970s and 1980s.

Two decades ago the question largely had shifted to the problem of how to get computing into the hands of the next three billion people. There was some work around the notion of special devices optimized for rural villagers that would be low cost, perhaps $150 or so.

For many at the time, likely most knowledgeable observers, the prevailing thinking was that it couldn’t really be done. And that remained true even as recently as the middle of the 2000 decade.

But as we stumbled upon a solution to the problem of getting communications to people at prices they could afford, we are about to solve the problem of getting computers to people, also at prices they can afford.

The notion, for some time, has been that in many parts of the world, the smart phone would be “the computer” most people used. That might turn out to be largely correct, for at least a time.

But it also now is possible that we know how to create and sell computers to people that cost no more than $150. Consider that the prototype “One Laptop Per Child” device had a screen of 7.5 inches diagonal and flash memory, with no keyboard.and used Wi-Fi for Internet connectivity.

Oh, that’s right, we now call that a tablet, and it is made and sold commercially by the likes of Amazon, Barnes & Noble, and soon Google and likely Apple.

One might note a similar process at work even in the area of rural broadband access. Does it make sense to spend up to $50,000 per home to provide broadband access service to less than 200,000 U.S. rural locations, when at least two other approaches are already available?

The Federal Communications Commission, for example, conducted a gap analysis that suggested $13.4 billion in subsidies would be required to expand availability to only 250,000 of the highest cost homes (0.19 percent of all U.S. homes).

According to the FCC, those homes would require subsidies of about $53,600 – on top of what service providers would expect to spend to connect a typical home.

Excluding the cost of serving these 250,000 homes, the cost of connecting the remaining 6.75 million homes would entail a subsidy of about $1,500 per home passed.

Keep in mind that the “broadband gap” affects less than five percent of U.S. homes. The Federal Communications Commission itself estimates that seven million U.S. households do not have access to terrestrial broadband service, representing about 5.4 percent of the 129 million U.S. homes.

Additionally, analysis assumes those households actually are occupied, but they are not. Some percentage is unoccupied, and some are used only partly as vacation homes.

According to the U.S. Census Bureau, about 18 million of the 130 million units are not occupied (about 14 percent).

On average, the gap estimated by the Commission is $3,357 per home passed, note Dr. George Ford, Phoenix Center chief economist, and Lawrence J. Spiwak, Phoenix Center president.

Even the then director of the National Broadband Plan, Blair Levin, said it will be too expensive to provide service to the last two percent of home using terrestrial facilities. Therefore, those homes should be served by satellite broadband.

A more reasonable approach to satellite broadband at the time might have been that if it costs $50,000 to provide a 4:1 Mbps terrestrial broadband service to a household, then is it reasonable to accept a “lower” service level by a network that already reaches those locations?

The situation has also changed since that analysis. ViaSat’s “Exede” satellite broadband service already has been offering speeds up to 12 Mbps downstream and up to 3 Mbps upstream, for $50 per month, since early 2012.

The HughesNet service, which has launched a new satellite of its own, will begin offering faster service beginning this month. Since both the ViaSat and HughesNet services use exactly the same satellites, it would be reasonable to assume that HughesNet will offer speeds comparable to that of Exede.

In fact, the National Broadband Plan explicitly recognized that the cost of ubiquitous coverage of terrestrial broadband could not be justified and furthermore recommended the use of “satellite broadband” as an alternative, as it is ubiquitously available, Phoenix Center argues.

The cost picture has changed dramatically since the FCC conducted its gap analysis. Though the original plan called for a 4 Mbps capability, Exede already sells a 12-Mbps service for $50 a month. As of Aug. 13, 2012, Hughesnet has not announced firm pricing and speeds.

But there is no reason to believe HughesNet will offer speeds any less than offered by Exede. The point is that by spending an abundance of money, the government simply does not make sense at the margin.

The point is that one has to be careful about interpreting Internet or broadband usage trends. In past years, some observers have argued there is a significant “digital divide,” using statistics about Internet or broadband usage (people who buy and use that product or capability) rather than broadband or Internet “availability” (the service actually is available to purchase).

A decade ago, access mostly was measured by activity occurring only on the fixed networks, as well.

The point is that the difference between whether a product is available, and whether a consumer chooses to buy it, is highly significant. A “digital divide” argument assumes that a product such as broadband access is statistically “unavailable,” meaning there is an “access to the product” problem. Lower availability in rural or sparsely-populated areas is one form of the argument.

The latest study of mobile broadband behavior shows the relevance of the distinction between “available to buy” and “I want to buy it.”

About 17 percent of mobile phone owners do most of their online browsing on their phone, rather than a computer or other device, the Pew Center Internet & American Life Project reports.

Young adults and non-whites are especially likely to use their mobile phones for the majority of their online activity, the researchers say.

Nearly half of all 18 to 29 year olds (45 percent) who use the Internet on their mobile phones do most of their online browsing on their mobile device, the study found.

Half (51 percent) of African-American mobile Internet users do most of their online browsing on their phone, double the proportion for whites (24 percent). Two in five Latino cell internet users (42 percent) also fall into the “cell-mostly” category.

Digital marketing specialist Troy Brown, president of one50one thinks Hispanics generate 50 percent of their Internet traffic from mobile phones.

The important implications here are that people might prefer to use mobile Internet and mobile broadband, rather than fixed access, in numbers that are significant.

Additionally, those with an annual household income of less than $50,000 per year and those who have not graduated college are more likely than those with higher levels of income and education to use their phones for most of their online browsing, Pew researchers say.

In that sense, the adoption of mobile broadband might be a rational choice, similar to adoption of mobile “as voice,” when people choose to use a mobile exclusively for their voice service. In fact, we might already have reached the point where further growth of fixed network broadband connections is limited or slowed because users have better mobile alternatives.

The Pew data also suggests that mobile broadband has been particularly important to populations that in the past have “under-indexed” for use of fixed network broadband. The point is that, aside from buyer preferences being at play, fixed network broadband purchases increasingly are not suitable measures of “broadband adoption.”

When 17 percent of mobile users report “mostly” using their mobiles for Internet access, any metrics of adoption that ignore mobile access will be misleading.

On a larger level, one might make the argument that the digital divide, and the communications divide, simply are problems we are solving.