Our Biggest Infrastructure Need? Think Broadband

by: David Fessler November 17, 2008 | about stocks: BRCM / CNXT / CSCO / GLW / JNPR / SMSC / TXN    

David Fessler

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As is usually the case, I'm sitting here writing from my comfortable home office in rural northeast Pennsylvania. I often marvel at the fact that even from my remote location, I'm able to do research and submit copy over a broadband connection. 

Of course, 20 years ago we never would have thought of a broadband backbone as a necessary component to our nation's infrastructure. Back then most of us interacted with our televisions far more than with our computers.  

Now, it's hard for most of us to imagine life without a high-speed Internet connection, especially if you work from home as I do. For millions of Americans, broadband is the enabler for telecommuting, giving many more options when it comes to who to work for and where to work. Most homes are quiet environments with limited distractions, and generally result in higher productivity than their noisy company office counterparts. 

It wasn't too many years ago that I was saddled with dialup. Trying to be productive with a dialup connection is like trying to type with your nose. It can be done, but it takes a lot longer...  

It is somewhat ironic that the most powerful nation in the world ranks twenty-fifth when it comes to broadband penetration. Indeed, only a little over 50% of American households have high-speed Internet connections. Compare that to South Korea, which has a broadband penetration of nearly 90%. 

Before you fault the U.S. Congress, know that there are no less than three broadband expansion bills that were introduced in 2007. While there has been much debate (hot air) regarding a national broadband initiative, Congressional action hasn't been forthcoming. What a surprise...  

But if President-elect Obama has his way, every household could soon have the opportunity for a high-speed hookup. As he states on his website: "America should lead the world in broadband penetration and Internet access." He thinks we should provide "true broadband to every community in America." 

If Congress and the new President are searching for a model to work from, they need look no further than one of America's own states: Kentucky.  

Just a few years ago - 2004 to be exact - only 60% of Kentuckians had access to a broadband connection. Three years later 95% had access... an increase of 60%. But this didn't just happen by accident. 

"ConnectKentucky" is the bluegrass state's arm of the larger, national, non-profit Connected Nation. Widely seen as the national model for digital inclusion, Connected Nation promotes higher broadband penetration and adoption.  

Although it initially targeted four states - Kentucky, Ohio, Tennessee and West Virginia - the ultimate focus is all 50. Connected Nation's research states that every 7% increase in broadband adoption could result in the following benefits: 

  • Job creation of around 2.4 million
  • Annual health care cost savings of $692 million
  • Annual fuel savings of $6.4 billion
  • 3.2 billion fewer pounds of CO2 emissions per year
  • 3.8 billion hours saved by accessing broadband from home
  • $134 billion in direct economic impact
 If Connected Nation's numbers are anywhere close to those above, President-elect Obama might just be on to something. Of course, this gargantuan task translates into some real opportunities on the investment side of the fence.
 
Seven Ways to Connect to Broadband Profits 

One way to play the broadband build-out is via specialty chipmakers that supply chips to the equipment companies. Broadcom (BRCM), Conexant Systems (CNXT), Texas Instruments (TXN) and Standard Microsystems (SMSC) all specialize in producing broadband chips. 

Another way is via equipment makers like Cisco Systems (CSCO) and Juniper Networks (JNPR). Cisco and Juniper's equipment - at the heart of all broadband networks around the world - controls many different kinds of Internet traffic and directs it to its final destination. 

A third way would be via Corning (GLW), one of the world's largest manufacturers of optical fiber, optical cables and other hardware and equipment components for the telecommunications industry. 

It's clear that President-elect Obama has many challenges facing him once he sets up shop, Bbut you can bet that since he's a Blackberry-toting, tech-savvy guy he wants to be connected everywhere he goes. And so do we. 

Good investing.
 

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This article has 9 comments:

  •  
    Nov 17 10:58 AM
    Noone (a phantomlike denizen of OptoMystic lightwaves) mentions--in the same breadth, if you like--Corning's further advantage, much more important than its leadership in inventing and developing "mainline" FiberOptic cable: their (relatively) new bendable cable for "local" hookups. Think apartment and office buildings, with so many angles and bends, formerly cumbersome, but no longer so. This product is bound to take off; hope it's just around the bend, so to speak.
    Reply | Link to Comment
  •  
    Nov 17 11:29 AM
    with all due respect - absolutely not. the biggest infrastructure needed in the US is an energy infrastructure to combat our 70% addiction to foreign oil. if we don't do that, nothing else matters. we need to adopt a strategic, long-term, comprehensive, energy policy:

    thefitzman.blogspot.co...

    and put bailout money toward jobs to create natural gas and electric cars and trucks, nat gas refueling infrastructure, solar, wind, and nuclear energy sources, and upgrade the electric grid. this should be priority #1.
    Reply | Link to Comment
  •  
    Nov 17 03:31 PM
    All due respect to Fitzman - points are well made. However IMO far too much energy is consumed by commuting. Ubiquitous broadband reduces the need to travel and thus reduces energy demand. All you say is necessary too. Lets just add broadband infrastructure buildout to the list and not argue about which should have priority. We can do it all.
    Reply | Link to Comment
  •  
    Nov 17 11:33 PM
    Ya Meatheads forgot to mention OCNW!

    DSL/IPTV/Ethernet

    Good stuff, and a fast growing company with cash, no debt and pretty much hit breakeven recently.
    Reply | Link to Comment
  •  
    Nov 18 09:03 AM
    Absurd, you can't use the phone, tv, computer without electricity, and our nation's grid needs modernization.
    Reply | Link to Comment
  •  
    Nov 18 10:31 AM
    it is only logical that broadband will have a terrific future, at some point,

    i bought some broadband hLDRS about 7 yrs ago (after the dotcom bubble collapse) on broker recommendation. what a disappointment.
    > jack
    Reply | Link to Comment
  •  
    Nov 18 12:24 PM
    Biggest infrastructure need? While broadband to less populated should certainly be part of any national infrastructure policy, your hypothesis is completely misplaced as a consequence of decades of neglect of the nation's physical infrastructure. By physical infrastructure, I'm referring to roads, bridges, mass transit, inter-city rail and appurtenant facilities. Healhty to any economy is the ability to move goods and natural resources where they can be put into the stream of commerce.

    You can click to initiate an e-commerce transaction all you want from your 100 mbps connection, but if the ability to move that good or resource from its source to its destination is impaired due to incapacity, decay, or failure, such investment in broadband would be for naught.

    Unfortunately, when it comes to basic economics, investment in less-populated areas is not the most efficient way to turn around a rapidly slowing economy. Your article is well-intended, but certainly not focused upon priorities.
    Reply | Link to Comment
  •  
    Nov 19 12:05 AM
    Sure wish they had a "Connect Indiana" program. Here I sit with houses all around me and 2 miles from a medium sized town and nothing but dialup. NO dsl, no wireless, no cable,.Nothing but the ultra-expensive Hughes Net satellite. I have friends that live in rural and smaller towns with 2 or 3 different choices. To make it worse, our dialup is only about 20k. Talk about waiting!!!
    Reply | Link to Comment
  •  
    Dec 13 03:31 PM
    The comparison with south korea on broadband coverage is not the right one. You have to see the the density of population in S Korea is 498/sqkm, and in US it is 31/sqkm.
    A more accurate comparison would be locate where over 75% population in the US lives and see if we can achieve over 90% coverage in that area. That said, the electricity grid and distributed generation both need to be built up stronger. Broadband would come right behind. The spread of the population makes it uneconomical for both cellphone towers as well fiber optic links to be placed everywhere immediately.
    Reply | Link to Comment
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