1. Broadband Adoption at Home: Trends & Prospects John B. Horrigan February 10, 2005 PURC Annual Conference: Emerging Technologies and Trends

2. Presentation Overview Big picture on internet access Latest in home broadband adoption The adoption environment The migration to broadband

3. Portraits of Access: end of 2002

4. Portraits of Access: end of 2004

5. Broadband at home, 2000-2004

6. Broadband at home – segments (April ’03 & Nov-Dec ’04 surveys)

7. Types of Home High-Speed Connections (end of ’04)

8. Broadband at home – subgroups (% of all in group, end of 2004)

9. Broadband at home – regions (% with broadband of all in group, end of 2004)

10. Broadband gaps over time (I) (% with broadband of all in group)

11. Broadband gaps over time (II) (% with broadband of all in group) 2004 data through June ’04

12. Availability 77% of Americans say broadband is available where they live – 8% say it’s unavailable – 15% don’t know Rural gaps – 27% of rural dial-up users say it’s not available – 11% of non-rural dial-up users say it’s unavailable Overall, 14% of dial-up users say broadband is unavailable where they live – All data on this slide from October 2002 survey

13. Adoption environment: price, service providers Among those with broadband or who know it’s available where they live: – 61% say they have more than one service provider – 17% say they have a single service provider – 22% don’t know Price (I) – $38.50 for those with > 1 service provider – $42.80 for those with a single service provider Price (II) – average monthly broadband price=$39 – $38 for DSL users – $41 for cable modem users  Data on this slide from February 2004 survey

14. Adoption environment: who wants it? Of dial-up users, in Feb ‘04: – 40% say they want broadband – 58% say they don’t want it In Oct ’02, of dial-up users: – 38% say they want broadband – 57% say they don’t want it Home broadband growth from 10/02 to 2/04: – 24%  42%

15. Adoption environment: changing user preferences? Puzzle – Size of dial-up pie shrinks, but share of dial-up who want broadband stays about the same. What gives? – Probably because some dial-up users who in ’02 said they didn’t want broadband do say this in ’04  approx 10%- 15% do. Why? – People do more things & spend more time online the longer they’ve been internet users. – This changes the online time preferences of dial-up users.

16. Evidence: online experience and intensity of use Average number of years online for dial-up users who want broadband: – 6.2 years Average number of years online for dial-up users who do not want broadband: – 5.3 years Average number of years online … – Broadband users = 7.0 – Dial-up users = 5.7

17. What drives intensity of internet use?  Measures of intensity of internet use: Probability of logging on, given day Amount of time online, typical day Number of online activities, given day  Largest independent predictor: Having a home broadband connection Number of years online  Between 1-2 years of online tenure will boost time online/number of activities just as much as a high- speed connection at home

18. Time online per day -- by type of connection & online experience (June 2003 data)

19. Reasons for switching to broadband at home (Feb ’04 data) Connection too slow36% Want to download files faster21 Job-related tasks10 Want “always on”7 Want to use phone/net same time7 Higher quality connection5 Easier access to entertainment4 Responded to promotion3 Price fell to affordable level3

20. What does this mean? People’s online time preferences change with experience. – Dial-up becomes a hassle as people do more things online This changes the value proposition of being online – The bits per buck calculation:  200 bpm/$20 = 400bpm/$40  Upshots:  Broadband is a good deal for experienced dial-up users when they reach a certain point in the evolution of their online behavior.  Price points may not be not a big part of the calculation

21. What does this mean for future adoption? Uptake has been very fast, notwithstanding the #11 world ranking for the U.S. Work to be done to close availability gaps Is it possible to change users’ online time preference? – Yes, online content becomes more compelling – So far, though, evidence shows a single application doesn’t drive switch to broadband – High-speed users do more of everything, not more of one thing

22. Notes Except where noted, data used here is from the Pew Internet Project’s national random digit dial telephone survey in Nov-Dec 2004 of 3,114 Americans. The Pew Internet & American Life Project is a project of the Pew Research Center Contact me at: jhorrigan@pewinternet.orgjhorrigan@pewinternet.org