Is Broadband Really Changing E-Business?

07/06/2003

The United States is a wired nation, but not completely so. Two recent reports paint starkly different pictures of the connectedness of the average U.S. resident. The first, released by Technology Futures of Austin, Texas, states that in 2003, the proportion of American households using broadband of some kind — DSL, cable or, in some rare cases, wireless — will surpass 20 percent. More and more people are buying permanent connections to the Net. At the other end of the spectrum, a report published by the Pew Internet & American Life Project indicates the digital divide is still a concern: One-fourth of U.S. residents do not use the Internet at all, including many people who live in homes with wired connections.

Although the digital divide has been discussed for many years, the new dial-up divide also has implications — and it might be worth reminding lawmakers who are trying to jump-start the economy how much increased broadband adoption could do for e-business. After all, a number of signs suggest that broadband connections both increase the volume of goods sold and provide for more informed consumer purchasing behavior. With a little help, broadband may yet make good on some of the more ambitious predictions of the dot-com bubble days.

Wired To Shop

A cursory glance at a few financial statements makes clear that although the yearned-for profits of so-called frictionless commerce have yet to materialize, there has been increasingly rapid growth in online retail in recent months. Moreover, Forrester Research is expecting a 26 percent jump in overall e-sales this year, to a total of US$95 billion. In some cases, individual companies also are showing sharper sales growth than in the past.

For example, Amazon.com reported in its most recent quarterly filing that sales increased to $1.084 billion, a jump of 28 percent compared with the same quarter a year ago. In contrast, that quarter, ended in March 2002, saw a jump of just 21 percent year-over-year from 2001.

The most obvious factor in today’s faster e-business growth is simply time spent online. “Broadband has had a huge impact on sales,” said Gartner analyst Avivah Litan, who observed that as broadband use has increased, so has time spent online by the average shopper. During the same period, online retail numbers also have risen. Although scientific correlation is difficult in such matters, Litan, who also expects to see about $95 billion in total e-tail sales this year, said Gartner’s surveys of home shoppers show that permanent Internet connections remove some hesitation from the online shopping process. “People don’t have to think about whether to connect,” she told the E-Commerce Times. (segue)