‘First-inch’ devices spur broadband uptake

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By Francis Moran

Back in the early years of this decade, when my wife worked in marketing for a large optical components company and inmedia‘s client portfolio was well studded with fiberoptic and next-generation communications companies, it just wasn’t Q1 in our household unless one or both of us were headed to the big Optical Fiber Communications Conference and Exposition, usually held in March at the Anaheim Convention Center.

At one memorable session at OFC2002, Kevin Kalkhoven, who had recently stepped down as CEO of JDS Uniphase, asked how many of those in the room had access to a broadband internet connection at home. About 10% of the hands in the room went up. And this, mind you, in a room full of people whose very business was high-speed communications!

My own hand was not among those in the air, but it wasn’t for lack of desire or want of trying to get a broadband connection at home. At that time, we lived along the Rideau River about 30 kms south of Ottawa. We were more than eight kms away from the nearest telephone carrier central office, so beyond the reach of DSL. Our cable service provider had not yet installed the necessary infrastructure to support an internet service. A very promising high-speed fixed-wireless transmitter was in the neighbourhood and we did fall within its footprint, but, being on the river, we were down in a slight valley and so shadowed from that transmission tower where line-of-sight was necessary. I eventually invested a huge sum in a satellite service that delivered a blinding 640k down and about 128 up.

Kalkhoven went on to describe the market forces he thought were in play that would drive broadband uptake at home. This was in the immediate aftermath of the dot.com meltdown, when massive investments in fiber networks and the hardware to manage them were being seen as utter folly. Thousands of miles of optical cable were lying dark, and some were wondering if those networks would ever be lit.

Kalkhoven told the crowd not to lose faith. Key among the the drivers he identified was what he called “first-inch” devices, a phrase that has continued to make an impression on me both because it was so highly descriptive but also because it was so unusually customer centric. One of the problems with the communications industry, Kalkhoven said that day, is that it refers to that last final link to the end-user as the last mile. “Since when was the customer the last part of anything” he asked, insisting that the link to the customer should be called the first mile.

He then went on to describe first-inch devices, those things that customers hold in their hands that would drive broadband demand. He said that the most popular gift the previous Christmas had been digital cameras. And what do you do after you take a picture with your new digital camera, he asked? You send it to grandma.

Second-most popular gift was game consoles, many of which were internet-ready, meaning players could connect with other players across the net.

Both these new toys were first-inch devices that were going to drive massive demand for broadband in the consumer market, he predicted, and this was before VoIP telephony was much more than a gleam in an engineer’s eye and social networking was something you tried to avoid contracting if you were sexually active.

Fast forward to today, and a Scarborough Research study that has measured a 300% increase in U.S. household broadband penetration since Kalkhoven gave that chat at OFC. According to the study, just less than half (49%) of U.S. households currently subscribe to a broadband internet service, up from 12% in 2002.

Impressive though that growth may be, the U.S. still significantly lags the world. Using a somewhat different index, the Organization for Economic Co-operation and Development said in June last year the U.S. had 22.1 broadband subscribers per 100 inhabitants, good for only 15th place among OECD countries. Leading the pack were Denmark with 34.3, Netherlands with 33.5 and Switzerland with 30.7. Canada was in ninth place with 24.9, and the United Kingdom clocked in at 11th place with 23.7.

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