Free and reduced broadband is an investment – companies are getting that now

The New York Times recently talked about a few companies (national and large regional companies) that are offering or plan to offer free or reduced services to low income residents. Here are a few of the opportunities they mention…

… Sprint announced that it planned to give one million low-income high school students a free device and a free high-speed data plan until graduation. Facebook is also working to bring to the United States a service known as Free Basics, which gives people free access to certain websites, including Facebook. Comcast recently loosened requirements for its low-cost broadband service, expanding it to anyone in public housing. …

Free and low-cost broadband programs have been around for a while, with Comcast rolling out one called Internet Essentials in 2011, Google offering free broadband in public housing, and Dell and Microsoft providing free or discounted devices to schools.

I’ve written about local efforts are well. What I really like about the article is the recognition that while it is good citizenship to work to get all people online, it’s also good business…

Yet while telecom and web companies cite altruism as propelling free or low-cost broadband programs, what is often left unsaid are the benefits the services bring to the companies. It’s part of a textbook business strategy known as “loss leader,” when a company provides discounted or free goods to get customers to buy more once they are in the store.

They elaborate on the strategy…

The strategy is increasingly important for the telecom industry, where growth has slowed and new broadband customers are harder to find.

Internet service providers “are trying to go after those folks who are willing to pay less, but not to appeal to those willing to pay more,” said Robert Seamans, an associate professor at the New York University Stern School of Business and a former economist at the Obama White House.

It seems like there’s probably a sweet spot price for people who don’t qualify for low-income status yet cannot afford “full price” options. Lisa Peterson de la Cueva writes eloquently on that need. A provider who could find that sweet spot could really make a difference to a wider group of people – and maybe  make up in volume what they might lose in the potential for full price customers. Or maybe folks would eventually upgrade to that status.

This entry was posted in Digital Divide, Vendors by Ann Treacy. Bookmark the permalink.

About Ann Treacy

I have a Master’s Degree in Library and Information Science. I have been interested or involved in providing access to information through the Internet since 1994, when I worked for Minnesota’s first Internet service provider. I am pleased to be a part of the Blandin on Broadband Team. I also work with MN Coalition on Government Information, Minnesota Rural Partners, and the American Society for Information Science and Technology.

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