Broadband take rate has nothing to do with price

Here is yet another marketing study that thinks broadband take rates (how many people sign up for broadband service) are affected primarily by price of the service. The study, done by The Yankee Group, shows just how wrongheaded both the analysts and their customers (mostly telcos and cable companies) are.

I have been dealing with residential and consumer broadband deployment longer than anyone else in the world. That's not a boast, it's just a fact. We were deploying residential broadband in Blacksburg in 1994, long before any of these other firms were evenly dimly aware there was a market for broadband.

Here is some of the things we figured out:

• Price is a factor, but it is NOT the primary factor, contrary to what The Yankee Group claims. We had apartments in Blacksburg where the broadband connection was provided for free, but some people did not use it.
• When someone says, "Broadband is too expensive," what they are really saying is that they do not yet understand the utility (value) of it to them personally or professionally. Once they do, price is rarely an obstacle.
• Lowering the price of a broadband connection does not necessarily create a big increase in the take rate. If the incumbent telcos and cable companies believe The Yankee Group, they are going to be disappointed.

What does increase the take rate is education, training, and rich local content. Teaching people how to take advantage of broadband for their own purposes has good results. The problem is that education takes time and effort, and these companies are impatient. They are stuck in a Manufacturing Economy model of promoting consumption (of broadband) simply by advertising. That only works up to a point. They would be better off taking some of their ad dollars and promoting local short courses and seminars to help people learn the utility of broadband. And if some of those ad dollars went toward the support of community Web portals that provided local content that is meaningful to people, they would also see increased take rates.

The bar chart at the bottom of the article lists all the reasons why people supposedly won't buy broadband. I've heard all of them, for years. They are all true, literally, but you have to digger deeper than that to understand what is really going on.

One more thing. This study, like the Pew studies that also try to figure out why people don't move to a broadband connection, is missing a vital and important question:

If you have a broadband connection now, would you go back to dial up?

No one ever asks that question, but you need that data to get a complete picture of what is going on. Intuitively, we all know the answer. No one on broadband wants to go back. No one. Once people learn the utility and value of a broadband connection, price is rarely an issue (if local prices are reasonably affordable).

What does this mean for communities? It is good news, because it means that modest investments in training and a good community portal will expand the marketplace for broadband in the community, which attracts private investment (i.e. broadband providers). Yes, you need to invest in infrastructure, but that is the not the only thing you should be looking at. When Design Nine helps a community develop a telecommunications master plan, we look at much more than infrastructure, because the Field of Dreams model (if we build it, they will come) does not work. The whole dot-com broadband collapse was due to excessive reliance on the Field of Dreams. And it was just that--a field of dreams.

Technology and telecom master plans have to take a whole community view of broadband needs, including training, content development, and economic development. If you don't do that, you can end up wasting a lot of money.