Has High-Speed Access Hit a Wall on Main St.?

NEW YORK Broadband growth in the U.S. slowed last year, as nearly half of American adults now have a high-speed Internet connection at home, according to new research from the Pew Internet and American Life Project. Forty-seven percent of those consumers—seven out of 10 home Internet users—have broadband as compared to 23 percent who still rely on dial-up.

But more significantly, the Washington-based group found that, in a maturing Internet marketplace, broadband penetration rose just 12 percent from 2006 to 2007, compared to a surge of 40 percent in the year-earlier period. The Pew Internet Project conducted its survey of 2,200 American adults in February and March. What does this mean?

“The easy pickings have been picked,” said Aaron Smith, research specialist, Pew Internet and American Life Project. “Now we’re entering into a situation where providers have to go after the folks who have not had broadband, may not feel they need broadband or haven’t had access to broadband.”

The communications industry’s continuing shift toward digital advertising is premised on ubiquitous high-speed Internet connections that make things like video possible. In a report released last month, researcher IDC forecast the Internet ad market will grow from $16.9 billion in 2006 to $31.3 billion in 2011.

“The future of Internet advertising and of Google, Yahoo and the other players depends on how fast video ads will grow and how well the media companies will be able to capitalize on it,” IDC stated.

Not surprisingly, the Pew Internet Project found that broadband users are bigger proponents of bandwidth-intensive behavior like Internet telephony and video.

“The common theme with respect to our current report is how broadband opens up a much richer, more immersive Internet experience for those who make the jump from dial-up to broadband,” said Smith.

Broadband users are more active in a variety of Web activities due to the ease of an Internet that is “always on.” While Pew researchers found that broadband proved to be an impetus for Americans to engage in a wider range of online activities than their dial-up peers, it also found they regularly spend time in lower-tech activities like reading online news sites and searching for information on Wikipedia.

On a percentage basis, the number of home broadband users is now about the same as the entire universe of Internet consumers accessing it by any means in 2000, when the Pew Internet Project began measuring online use. Back then, 48 percent of respondents said they went online.

Growth among broadband’s historically strong constituents—young, educated and relatively affluent Americans—remained strong in the latest survey; with broadband usage high among Americans aged 18-49, those with annual household incomes of more than $75,000 and college graduates. But compared to the overall slowdown in growth among broadband adopters in 2006-07, there was evidence of more rapid growth among demographic groups that have not formerly been associated with high-speed Internet access.

In Pew’s latest survey, broadband usage jumped 43 percent among Americans with annual household incomes under $30,000, 29 percent among African Americans and 24 percent among rural residents. Consumers who say they attended some college but never graduated experienced a 23 percent increase. Those households with incomes under $30,000 were the only major group where increases met or exceeded growth rates seen in the 2005-06 period.

Several U.S. municipalities have stepped up their broadband coverage. Dozens of cities large and small are pursuing plans to set up municipal wireless coverage, which would give either free or government-subsidized connections to residents.

Google has shown a keen interest in the projects, launching a wireless network in its hometown of Mountain View, Calif. It also partnered with EarthLink to win a bid to provide that city with a high-speed wireless network.