Telcos to Lose in Broadband Slowdown

Market research firm Pike & Fischer predicts the current economic conditions will slow U.S. broadband growth by 12 percent in 2009. Cable companies, the researchers say, will grab most of the growth to be had despite telcos AT&T and Verizon's fiber rollouts--most of their potential customers are still covered only by slower DSL services. President-elect Barack Obama's economic stimulus package, though, could change those predictions.

The troubled U.S. economy will inevitably lead to a decline in new broadband connections in 2009 unless President-elect Barack Obama is successful in expanding broadband availability as part of his economic stimulus package, according to a new forecast by market research firm Pike & Fischer. Based on current conditions, P&K predicts a 12 percent decline this year for high-speed connections.

The researchers, based in Silver Spring, Md., anticipate approximately 5.7 million U.S. households will become new high-speed Internet customers this year, bringing the total number of broadband-connected homes to 74.5 million. That would represent 63 percent of U.S. households.

P&K also predicts the chief beneficiaries of the broadband growth will be cable companies, which are predicted to capture 75 percent of the new growth. According to P&K, while telephone companies such as AT&T and Verizon are successfully rolling out new fiber-optic Internet services that can exceed the speeds offered by cable, most of their service areas are still covered only by DSL service, which is slower than cable modem offerings.

Obama's economic stimulus plan, though, could change P&K's predictions.

"Government initiatives, such as tax incentives and loan guarantees to help expand broadband infrastructure into underserved areas, could enable service providers to bolster their customer counts," Scott Sleek, director of P&F's Broadband Advisory, said in a statement. "In addition, policymakers are likely to support training and education programs aimed at increasing customer adoption of broadband. These steps could offset what will be an inevitable slowdown in subscriber growth."

Obama said Dec. 6 that investing heavily in computers and broadband connections for schools and hospitals will be part of his immediate economic recovery plans after he takes office Jan. 20. Obama added that part of the plan is to "renew our information superhighway. It is unacceptable that the United States ranks 15th in the world in broadband adoption. Here, in the country that invented the Internet, every child should have the chance to get online, and they'll get that chance when I'm president-because that's how we'll strengthen America's competitiveness in the world."

In addition to connecting schools and libraries to broadband connections, Obama promised a renewed push for health care IT, which President Bush has also touted as a key to saving millions in health care costs. Bush's health care IT initiatives, though, have failed to gain traction over costs, security and privacy concerns.

"We will make sure that every doctor's office and hospital in this country is using cutting-edge technology and electronic medical records so that we can cut red tape, prevent medical mistakes and help save billions of dollars each year," Obama said.