September 18, 2008

Is Home Broadband Adoption Slowing?

In our Home Broadband Adoption 2008 report, we hinted at the possibility that the growth rate in home high-speed adoption was slowing. The May 2008 data highlighted in that report showed that 55% of American adults had broadband at home, little changed from the 54% figure registered in our December 2007 survey. Since then, there have been indications that a slowdown is upon us. AT&T reported an addition of only 46,000 broadband subscribers. in the second quarter of this year (less than one-tenth of additions in the first quarter of 2008). Verizon added only 54,000 DSL subscribers in the second quarter and Comcast’s second quarter growth in broadband subscription was 18% lower than a year earlier.

Data from our August 2008 survey are further evidence that the days of rapid uptake of home broadband may be on the shelf. That survey shows that 57% of Americans have broadband at home, a two percentage point change since May and a difference that is not statistically different across the surveys. Since December 2007, home broadband adoption has grown by only 3 percentage points according to Pew Internet Project surveys, from 54% to 57% of adult Americans.

Two factors jump to mind as reasons for this slowdown. First, high growth rates become more difficult to sustain as society marches up the adoption curve; it becomes a tougher sell to reach non-adopters once the 50% threshold is passed. Remaining non-adopters – the 9% of dial-up users and 25% of non-internet users – are older and lower-income Americans. They are not likely candidates for upgrades in household communications technology.

Second is the economy. With unemployment now up to 6.1% (from 5.0% in December 2007) and growing economy uncertainty, adding to household expenditures with a broadband connection may not be a priority for some people. On a monthly basis, broadband is still more costly than dial up by a $34.50 to $19.70 margin, according to our May 2008 survey. This pattern -– economic slowdown and a stall in tech adoption — was evident in the 2001 recession with respect to general internet adoption. At the start of that recession in March 2001, 57% of Americans were internet users, a figure that changed very little over the next year. By March 2002, 58% of U.S. adults were online users.

Our latest data suggest that broadband has entered a mature phase in the United States, although not necessarily a static one. Even if the pool of broadband subscribers is not expanding at a fast rate, many existing broadband users are demanding faster connection speeds, and the mobile internet is adding “always connected” to people’s “always on at home” relationship to the internet. Whether or not a stall in broadband adoption is a problem is another question for stakeholders to consider. Is it an expected phase in technology adoption? Are those without broadband at a disadvantage in a digital society? Is society worse off with some level of broadband disconnectedness? If so, what level?