– Broadband increasingly a necessity for U.S. households –
– U.S. Households turn to broadband Internet during recession –
WASHINGTON D.C. – July 14, 2009 – With $32 billion gains in 2008, consumers increasingly benefit from using broadband at home, according to a research study released today by Jonathan Orszag, a former Economic Policy Advisor on President Bill Clinton’s National Economic Council; Robert Willig, Professor of Economics and Public Affairs at Princeton University and former chief economist in the Department of Justice’s Antitrust Division; and Mark Dutz, a Special Consultant with Compass Lexecon, an economic consulting firm.
The study, entitled “The Substantial Consumer Benefits of Broadband Connectivity for U.S. Households,” reveals that broadband Internet access is now considered a necessity by many American households with benefits to U.S. consumers in the areas of education, health care, work, news, entertainment and civic affairs.
“What this study does for the first time is quantify the recent increases in value that Americans place on, and derive from, their broadband connections, amounting to some $32 billion per year in consumer benefits,” said Jonathan Orszag, senior managing director at Compass Lexecon. “The increased value consumers place on broadband at home corresponds to a changing perception over time by users, with home broadband increasingly seen as a necessity for which people will find a way to pay.”
The Dutz-Orszag-Willig study shows that the benefits enjoyed today are only the beginning, with future broadband-enabled technologies on the horizon. Smart power grids to proactively maintain and save energy consumption, enhanced communication about health status and potential treatments, and effective web 2.0 tools to better manage civic elections are just a few of the additional significant advantages that broadband may make possible.
The study finds that home broadband adoption increased more than six-fold between 2001 and 2008 with significantly more broadband adopters, upgrades from dial-up and new home connections.
66.6 million households used broadband in 2008, an increase of six times the 10.4 million households that used broadband in 2001.
The number of dial-up users has decreased substantially, from 44.2 million households in 2001 to 10.5 million in 2008.
Households with no home Internet fell from 53.6 million in 2001 to 39.7 million in 2008.
“Once people get a taste of the entertainment, educational opportunities, social networking and everyday services that broadband access facilitates, they grasp the immense value it can add to their lives as a powerful tool, regardless of where they come from,” said Co-Chairman of the Internet Innovation Alliance Bruce Mehlman. “Once a broadband user, always a broadband user.”
The greater value placed on broadband by Americans mirrors their increase in broadband usage, with home broadband market share growing from 32% in 2005 to 57% in 2008. The research data, for example, reveals sharp increases in weekly online activities that are facilitated by a broadband connection, such as a four-fold increase in the percent of households watching videos online over this four-year period (from 5 percent to 21 percent).
The study also shows that broadband Internet access, characterized by speeds much faster than dial-up and by being continually on and available, is valued highly regardless of ethnicity. While there are significant differences in the broadband adoption rates by ethnicity, among those who purchase broadband at home, there is no significant difference between how much African-Americans, Caucasians and Asians value broadband Internet service.
“Broadband is one of the great equalizers, and it’s encouraging to see that taking advantage of the value that broadband access has to offer is now equally important to minorities,” said Larry Irving, co-chairman of the Internet Innovation Alliance. “The opportunity, for example, to benefit from eHealth capabilities with more effective monitoring and communication about health status is an advantage of broadband that far outweighs the cost of service. But none of this is possible without adoption; you have to log on to reap – and even to recognize – the benefits.”
The American Recovery and Reinvestment Plan (ARRP) earmarked $7.2 billion for broadband development and tasked the Federal Communications Commission (FCC) with devising a national broadband plan. According to the IIA, an effective National Broadband Strategy will enable the government to partner with the private sector to extend broadband service to every corner of the country, while at the same time raising awareness of its benefits.
Professor Willig emphasized, “We are particularly proud of our use of both survey methods and more sophisticated demand estimation with different recent data sets to derive reliable and detailed measures of the contribution of broadband to consumer welfare.”
Orszag and Dutz will present the findings of the 51-page study today in Washington, D.C. at an Internet Innovation Alliance (IIA) Academy on Capitol Hill. To access the new Dutz-Orszag-Willig broadband research, visit https://internetinnovation.org/files/special-reports/CONSUMER_BENEFITS_OF_BROADBAND.pdf. Comments, reactions and questions regarding the study can also be shared on the IIA’s blog “The Podium,” available at the IIA website www.internetinnovation.org.