Broadband Internet has become a hot topic for debate among the U.S. presidential candidates. Many believe that broadband is one of the key components needed to maintain competitive advantage over other nations. The Internet not only affords a vast amount of information, but can also create information jobs and support small businesses. Unfortunately, the United States has already dropped from a #1 position in worldwide broadband penetration down to #15.
A move by the candidates to extend broadband's reach to the rural communities would likely be incentivized by the government. After all, a move like that may not make economical sense to cable or satellite Internet providers. This is great news for such providers, since it enables them to expand their network with government aid. The big question is which companies the government will stand behind - cable or satellite.
Cable companies like Time Warner Inc. (NYSE: TWX) and Comcast Corporation (NYSE: CMCSA) have made heavy infrastructure investments in the past and now offer comprehensive data services over one of the fastest residential data lines available. Any government-supported effort to extend this infrastructure in rural areas to promote broadband would also enable the Time Warner and Comcast to upsell the customers on other products like Cable TV and phone services.
Meanwhile, satellite Internet providers like DirecTV Group (NDAQ: DTV) already provide satellite Internet services to many rural areas. These connections are still high-speed by FCC standards, but tend to be slower and more unreliable than cable data lines. However, promoting satellite services like DirecTV would be far more economical than investing in cable companies to build their infrastructure further into rural areas of the United States.
The presidential candidates have yet to outline very specific ways in which they will work to improve broadband penetration. One potential way is to subsidize cable development into these areas in order to extend the reach of their services. Another way may be to subsidize consumers directly to purchase more expensive forms of satellite Internet and be connected. Regardless, getting more consumers online should be a boost to both Internet providers and other online ventures.
Shares of Time Warner Inc. are down $0.10, or 0.64%, to $15.16.
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