Broadband growth stalls; are we hitting the peak?

After several years on a tear, the growth of broadband has abruptly come to a crashing halt. The 20 largest cable and phone companies in the U.S. added only 887,000 new customers in the last three months, a growth rate of just 1.4 percent for the quarter and an ominous sign that broadband penetration may be reaching its peak. (Last year, overall broadband growth was 17 percent.)

Nationally, some 65 million customers have broadband services, which reflects a good portion of the country using high-speed Internet but is still a long way from, say, the roughly 87 million households that have either cable or satellite TV. 35.3 million customers get their high-speed data via cable, and 29.7 million use DSL (and similar phone-company-provided access).

What's going on? Blame market saturation and the economy, of course, and blame the phone companies, which are seeing an exodus of customers to cellular alternatives. (The growth of new DSL customers is now a fifth of what it was during this period last year, while cable companies have only seen a 15 percent slowdown in growth.) Meanwhile, anger over policies like bandwidth caps and throttling are probably not helping sales, though providers are scrambling to upgrade services with faster alternatives and even new options like Verizon's FiOS.

Lurking out there, though, are those millions of people—10 percent of American adult Internet users—who are still on dial-up. Mainly low-income residents, these users were recently polled about why they haven't upgraded: While 14 percent said there's no broadband available in their area, 35 percent said it was too expensive, and 19 percent said there was nothing that could be done to convince them to upgrade. Nothing? Now that's going to be a tough sales call for the broadband guys...