The government has earmarked $8 billion to expand the Internet infrastructure in the United States. In addition, the government will foster partnerships between the public and private sector to enhance and expedite the success of the program. Incentives will include, tax breaks, low-interest loans and subsidies. Many people believe that nationwide access to the Internet should be no different than the necessity for access to electricity or water.
Internet access in most rural areas in the U.S. is still run off of dial-up connections, which are extremely slow and incapable of handling the Internet traffic today. The U.S. is not one of the top ten countries when it comes to Internet access. Surprisingly, the Scandinavian countries, Canada, Britain, Belgium, France and Germany are amongst the top ten countries in the world with respect to the provision of broadband access to their citizens.
Verizon [VZ], AT&T Inc. [T] and Comcast [CMCSA] dominate the infrastructure for broadband communications in the U.S. These companies have avoided rural communities due in large part to the prohibitive costs associated with deploying broadband access to these communities. Some analysts believe that these companies are monopolizing access to broadband through their phone lines and cable lines and that the FCC has failed to create enough opportunities and appropriate incentives for competitors to enter the market.
Verizon [VZ] is betting heavily on the projected demand for broadband communication and is building fiber optic lines that will be directly connected to homes. As the convergence between television, communication, voice and the Internet increases, Verizon believes the demand for broadband will increase dramatically. Currently, the speed of broadband connections are about 5 megabits per second; Verizon plans to increase the speed of its broadband connections ten fold to 50 megabits per second.
Intel [INTC] has invested heavily in WiMax broadband technology that can deliver wireless Internet access to homes over long distances without the need for local WiFi antennas. Clearwire [CLWR] in partnership with Spring-Nextel [S] is investing in WiMax technology. Their rivals, Alcatel-Lucent [ALU], Qualcomm [QCOM] and Ericsson are investing in the competing LTE broadband technology. It is hard to tell which technology will win or if both will gain broad appeal.
The Federal Communications Commission [FCC] has approved the use of power lines to transmit broadband. This technology is already in use, it is based off of the electrical wiring in homes coupled to radio frequency energy, which is then used to provide Ethernet connections in homes. This technology is being developed for deployment over longer distances. The use of power lines will provide an opportunity for energy companies to compete in the broadband space. Energy companies like PG&E Corp. [PCG] and Duke Energy Corp. [DUK] will benefit if this technology becomes scalable.
Networking communications equipment providers who are already playing a role in the deployment of broadband will benefit from the push for nationwide Internet connectivity. The major players in the space, including, Cisco Systems inc. [CSCO], Ciena Corp. [CIEN], Juniper Networks Inc. [JNPR] and Tellabs Inc. [TLAB] will be beneficiaries of the nationwide Internet network build out.
Once the infrastructure is in place, the retailers of computer equipment and Internet service providers should benefit from increasing demand for their products and services. Dell Inc. [DELL], Hewlett Packard Co. [HPQ] and Apple Inc. [AAPL] are well positioned to participate in the potential increase in demand for their products. Services companies such as International Business Machines Corp. [IBM] could benefit from the overall demand for computing services. Microsoft Corp’s. [MSFT] Xbox Live and Internet TV service should experience growth in users. Some of the leading Internet service providers such as Google Inc. [GOOG] and Yahoo Inc. [YHOO] will experience growth in traffic to their sites.
The list of beneficiaries of a nationwide deployment of broadband Internet access is endless and the effect of high-speed broadband access all through the U.S. is hard to imagine. However, the saying, “If you build it, they will come is profound.” Marketers, online schools, research institutions, banks etc will benefit from nationwide broadband connectivity? The deployment of broadband Internet connectivity throughout the United States will undoubtedly revolutionize how people, the government and businesses interact.