THE DIGITAL DIVIDE

A MARKETING CHALLENGE FACED BY ORGANIZATIONS

MAY 4, 2014mba 506

Nancy Southerland

In 2013 marketing research via the internet comprised 31.8% of the $31.9 Billion revenue

generated by the Market Research Industry here in our United States (Lazich, 2015 ed.). Given

this large per cent of marketing dollars spent on research via the internet, this opportunity is not

available for every United States citizen or for every citizen globally to participate in these

activities performed by businesses or by marketing firms nor is the opportunity for the marketer

to have access to all willing market research participants thereby skewing the results which in

turn misrepresents or skews facts to businesses as they try to discern or determine a market

demand estimate or make other marketing decisions. Thus, the individuals with broadband

internet and those without broadband internet are each a different market segment as distinctly to

market to as the marketing efforts done to Gen Xers in contrast to Gen Yers and must be treated

likewise in this fashion in marketing research.

There is an identified contrast between these individuals. This travesty is what is called the

digital divide i.e. those individuals that have all the internet that they desire as compared to

those that do not have broadband at all in rural areas or those that are underserved with dial-up

internet. It is not only the inability to participating in market research data collection that the

digital divide precludes, but also the high level Web usage activities of educational and

entertainment web browsing, e-mail communication, uploading, downloading, gaming, at home

businesses, at home education, socialization through social media, etc. is precluded. Also, those

that are underserved by dial up have only the potential to do light Web usage. This circumstance

is detrimental in that creativity and innovation are stagnant in these homes and in these people

with the flow of stagnancy creeping into businesses and into our land.

Our United States is a long way from its goal of making broadband internet available to all of

its 314 million Americans. Forty percent of the homes were without broadband access in 2009

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(Kotler, 2012). As of 2012, 19 million people had no opportunity to buy broadband internet in

their homes representing 6% of the American population (Brodkin, 2012). These individuals are

underserved by the telecommunication companies like CenturyLink, Cisco, and Comcast and are

experiencing an unfilled demand for this innovative societal change product that is in its growth

stage in its product life cycle.

Furthermore, according to the Federal Communications Committee 100 million Americans

that are not in rural areas and that have broadband internet available to them are not subscribers

(Brodkin, 2012). Thus, these individuals that are regularly utilizing the internet are different in

comparison to those individuals that are either light web users or not at all. The latter would not

exhibit the same marketing research results as compared to those that are heavy web users i.e.

the digital divide. These individuals are not internet driven, tech savvy, market responsive

individuals and are less likely to be early adopters of our current market new products. They are

not better suited employees for today’s organizations. Thus, this digital divide further represents

another loss of innovation and marketing/growth both individually and collectively for the

businesses in our land. The market demands of businesses are reduced by this circumstance

depicting further travesty and a definite marketing challenge faced by organizations.

Given that over a decade has elapsed since market availability of broadband internet, these

individuals that have had broadband available and do not have it in their homes obviously are

late adopters and represent another issue of lagging and plague in our land. The groundwork has

not been laid indicating the extreme dire marketing need of the broadband internet product for its

continual consumer and business penetration. Thus, in these individuals this broadband

penetration or availability is truly not broadband penetration, for it is not adoption. True

broadband penetration is adoption by the individual and would yield marketing data results

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indicating innovation and change (Joseph, 2012). Delivering broadband infrastructure does not

change the mindsets of individuals. Thus, both the underserved and those that have the

opportunity and do not take it stifle the United States’ innovation and creativity while also

inhibiting innovative national/global market development in the trade issues that deal with the

marketing of exports.

This in turns jeopardizes domestic economic growth and global marketing growth i.e. the

marketing of exports coupled with the future development of new products, new markets, new

innovations, new product differentiations, and new pioneering frontiers such as the internet that

truly is a societal change agent. As a land we are operating on the inside of the curve of the

production frontier possibilities curve and are not utilizing all of our resources neither efficiently

or effectively due to the detrimental effect of the digital divide.

Likewise, high speed internet via broadband infrastructure facilitates the macroeconomic

growth of a country by accelerating the distribution of information and ideas, by fostering

competition for the development of the new product and processes, and facilitating the

introduction of work practices, entrepreneurial activities and improved job matching (Czernich,

2011). Thereby, intense broadband penetration i.e. adoption by businesses and consumers is an

innovation that continually feeds the Marketing Information System of the organization and is a

critical issue for any fully functioning Marketing Information System. If this does not occur, then

the Marketing Information System is stagnant and not representing of reliable, fresh information

to the organization.

However, we see only 23 out of 100 people in the United States with broadband

subscriptions according to the International Telecommunications Union and their Global

Broadband Spectrum (Johnson, 2010). The internet may have been invented in the United States,

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but unfortunately in too many places the United States continues to lag behind Asia and Europe

in terms of broadband speed, penetration, and adoption furthering the digital divide. This gives

a new dimension to the discussion of the digital divide to include not only those individuals that

are underserved with dial up or have no broadband access as compared to those that have

broadband subscriptions but to also say that there is a digital divide with the United States as

compared to our global neighbors.

In fact, given that the current broadband penetration of the United States is an unflattering 15th

in global broadband penetration ranking, our macroeconomic growth is hindered; and therefore,

new product developments with little groundbreaking market/technological change are prevalent

(Crossman, 2009). Conclusively, if there is not economic growth, then there is no consumer

surplus of which to purchase these new product developments or newly launched product

differentiations thereby effecting the pricing of the marketing programs of businesses. Thus, it is

a vicious cycle and is further statement of the marketing challenge faced by organizations and

businesses of under an under-capitalized and underserved broadband internet product in the

United States. Give the resource scarcity of under-capitalization, there is latent demand in certain

individuals and businesses for the broadband internet product.

Furthermore, the United States is behind many rich and not-so-rich countries in broadband

internet penetration and access subsequently resulting in our inability to meet the global

expectations of highly needed innovative change which precipitates sustainable development.

This is a critical issue for the United States, and the lack of broadband internet penetration is

prohibiting market growth. The understanding of this new paradigm shift of broadband

penetration, internet adoption, which is authentic broadband penetration, sustainable

development is tantamount in relieving organizations of the marketing challenge of the lack of a

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fully capitalized broadband internet (Armenta, 2012). The common participation of community

participants be it corporations, the United States government, non-governmental organizations

(NGOs) will be needed to develop national plans and agendas for digital inclusivity particularly

in rural and underserved areas that fully serves all market participants i.e. both buyers and sellers

(Armenta, 2012).

The digital divide is now spanning gigabits as opposed to megabits thus fueling the ideal of

community broadband-also known as municipal broadband-which would be a way for

municipalities to drive broadband into lightly or no service areas and provide relief to the

marketing challenge of our United States organizations of an undercapitalized internet (Barthold,

2014). The span from megabit to gigabit has only exacerbated our greater digital divide with our

global neighbors further making statement of our loss of innovative leadership. There is even a

digital divide amongst the states of the United States. High-risk states are Kansas, Minnesota,

New Hampshire, Utah, and Tennessee need further scrutiny while examining this digital divide

issue (Barthold, 2014).

Similarly, Cznerich sites in his evaluation of the OCED countries (Organization for

Cooperation and Economical Development) during the period of 1996-2007 that the Gross

Domestic Product per capita is about 2.7% - 3.9% higher on average in the country than before

broadband penetration (Cznerich, 2011). These countries number 25 including countries such as

Australia, Canada, Denmark, Germany, Japan, South Korea, the United States and 18 others. His

work further states that an increase of broadband internet penetration by 10 percentage points

increased annually per capita Gross Domestic Product growth by .09% - 1.5% (Czernich, 2011).

Therefore, an increase of broadband penetration coupled with policy of the national government

for digital inclusivity are the major drivers that affect the innovative capacities of an economy

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i.e. the market and organizations through development of new products, processes. and business

models to promote growth. Joseph states in his work that the business models that precipitate

from broadband internet use are just as important to economies as the necessary devices that

utilize the internet given that economies need business models for marketing growth (Joseph,

2012). High speed internet via broadband infrastructure facilitates the spatial distribution that

previously had to be collocated which in turns allows for business models to develop (Czernich,

2011). The precipitation of business models is indicative of the broadband internet product

being a societal change agent.

Thus, there must be ubiquitous broadband for the emergence of new businesses and firms so

that competition can be fostered coupled with the innovative process. According to the

Organization for Cooperation and Economical Development, the economic crisis of 2008 and

2009 with its economic downturn brought many countries’ governments including the United

States government to the decision of providing economic stimulus packages to hopefully halt the

economic downturn by emphasizing investments in high-speed internet and promoted the roll-

out of broad band networks (Czernich, 2011).

Furthermore, it is not only businesses that but the home that fuels innovative capacity. True

broad penetration, meaning adoption and intense Web usage, develops and spurs human capital

which in turn fuels and results in new processes and new product differentiations in our United

States businesses and organizations consequently promoting further economic growth resulting

from broadband penetration. The residential broadband that is adopted will further create better

informed and more innovative employees and improve the level of information in the population.

In fact, researches determined that each percentage point of broadband internet penetration

results in an overall employment increase of 0.2 to 0.3 percent (Johnson, 2010). Broadband

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penetration also fuels personal entrepreneurship by allowing individuals to have resources and

tools to enable them to begin home businesses. This entrepreneurship is seen as an important

driver for marketing growth subsequently fueling market demand for new innovative products

and product differentiations.

Broadband adoption both in the home and in businesses diffuses the marketing challenge

faced by organizations and businesses of an undercapitalized internet by fueling the demand for

internet and providing pressure on those that hold the purse strings of which that need to be

loosened for a fully free and capitalized internet product (Rosston, 2011). Similarly, programs of

education to households about the benefits of broadband internet in the home be it through

digital literature training and exposing households to broadband through greater access, and

discounted service for those in personal need of subsidy will further accelerate the demand for

internet. As demand continually for broadband internet increases with broadband deployment as

an action and further utilization of broadband infrastructure and application occurs, national

aggregate outputs are expected to be enhanced. Thus, new market innovations will arise raising

market demands.

However, currently internet provision is stifled with companies such as CenturyLink, Cisco,

and Comcast being sole providers of this product. For example, CenturyLink’s trade receivables

stood at $1,959 million in 2012 and formed 54.22% of the company’s current assets (Century-

Link, 2013). Therefore, CenturyLink is laden with trade receivables which has great opportunity

to turn into bad debt. This limits the availability of expansion dollars needed to penetrate areas

without broadband access. It is evident that they have not the capability to feasibly penetrate

areas of little or no broadband internet due to their financial standing which explains why rural

areas have not been served with broadband internet as part of their revenue model.

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Similarly, Comcast is under the gun with increasing total debt that increased from $39,309

million in 2011 to $40, 458 in 2012 (Comcast, 2013). This is significant because the company

incurred the debt for working capital needs and capital expenditure needs. Fundings must be

taken out of cash flow to service the debts or Comcast is at risk for them to be come due before

maturity. The point being with this financial proclamation is that this huge debt limits the

availability of cash for growth thus making it highly impossible for Comcast to provide future

investments for the underserved areas with broadband internet. Thus, rural areas would not be

part of their revenue model as well due to the lack of return on investment.

In contrast to CenturyLink and Comcast, Cisco exhibits much more liquidity and strength to

fight this broadband penetration battle. The company has reduced its short-term debt from $588

million in 2011 to $31 million which is an impressive decline of 94.7% over 2011 (Cisco, 2013).

Further Cisco’s working capital increased from $39,725 million in 2011 to $44,202 million

which is an increase of 11.3% over that in 2011 (Cisco, 2013). Therefore, since Cisco is being

unharnessed of its debt burden coupled with its increasing liquidity, the company has adequate or

sufficient capital to provide furtherance of broadband internet in underserved areas given that

that is their intent.

For years telecommunications providers such as Comcast and CenturyLink have challenged

local governments that develop their own networks in order to provide internet to their citizens.

This resistance has taken the form of aggressive lobbying that results in barriers to entry which

has been mandated by state governments and prohibits new corporate players from entering the

broadband playing field (Heaton, 2014) Therefore, this adds further to the discussion of the

digital divide. There is a digital divide meaning hostile division in thought processes amongst

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traditional big cable broadband providers and the specific state governments on whom is to

provide the product of broadband internet.

All of this digital divide further inhibits businesses and individuals from reaching their full

innovate capacity which in turn stimulates market growth. For example, according to the

Institute for Local Self-Reliance (ILSR), 19 states have anti-community broadband legislative

barriers enacted and more states are considering this type of ludicrous actions. For instance, in

Kansas particularly there was legislation introduced that would have prevented local

governments from creating their own broadband networks or from partnering with companies to

provide them. This activity or action is a stifling measure to the growth of our great land. In fact,

the bill was backed by Kansas Cable Telecommunications Association (KCTA) whose members

include the broadband internet provider Comcast and Time Warner Cable (Heaton, 2014). This is

a travesty.

There is much digital divide about who will be allowed to provide broadband or whose

responsibility that it is to provide this funding for broadband internet penetration, yet by

attempting to stop the expansion of broadband internet penetration or connectivity in Kansas or

any other state all over the United States sets the big telecommunications companies like

CenturyLink and Comcast up to collapse as well as our nation within time if this digital divide is

not fixed. These businesses act in this fashion to preserve their own revenue models and

business models but not in the best interest of the United States of America.

If these companies attempt to suppress how people do business and communicate and if they

cling to their old revenue models, they will soon fail. New revenue generation models need to be

employed. With the onset of the industry the music industry had to change. It stands to reason if

businesses such as Comcast and CenturyLink cling to their old ways of making revenue i.e.

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accepting as a given their old broadband internet customers/business and refuse to find new

revenue possibilities, they will plunder when the free market is cut loose to free the internet as a

product in its undercapitalized plight.

For businesses and citizens of the United States to be online is not a luxury anymore but is a

necessity. Gone are the days that the only negativity to this discussion of the digital divide was

having to wait on downloading a movie for entertainment a few seconds. Furthermore, dial-up

speeds are not sufficient speeds for any business and are not sufficient speeds for anything other

than light e-mail and will not support any intense Web usage that a tech savvy individual

employs. The digital divide must be removed.

Broadband penetration are the highways and the railroads for the 21st century. This

infrastructure is required to transmit products of which in this day is information from seller to

buyer (Why broadband service is so awful, 2010). Our creaky internet makes it hard for United

States entrepreneurs to compete in global business. Succinctly this circumstance generates

stagnancy in market growth and in the furtherance of business competition. In fact, the United

States came in 40th in assessment with other nations in the criteria of who was leading in the

progression toward a knowledge-based economy over the last ten years (Why broadband service

is awful, 2010). Our Marketing Information Systems will fail if this digital divide of the United

States as compared to our global constituents is not stopped.

In fact, we are at loss in this global race for innovation. Thus, the United States’s broadband

penetration is not only slower and more expensive because of lack of the free market but falls

behind tech-savvy nations such as South Korea and Japan, and the United States falls behind in

infrastructure in nations like Portugal and Italy. It was not always this way. A decade ago the

United States ranked number one in broadband penetration, performance, and price i.e. the

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marketing program was correct. That is not true today; the marketing focus as well as marketing

mix must change,

In conclusion, the error made years ago by the Federal Communications Committee of

classifying the internet in an incorrect fashion created this triune digital divide. Again the

digital divide is the comparative contrast of a broadband internet provided for individual as

compared to the underserved individual or worse yet with no broadband penetration. Secondly,

the digital divide is the comparative difference of the United States and our global neighbors.

The broadband penetration and the internet product given to United States businesses and

consumers is not the same internet provided to our neighbors’ businesses and consumers.

Thirdly, the digital divide exists between the telecommunication companies and the state

governments and federal government because the broadband internet product was classified as

information service verses a telecommunications service initially.

The reclassification to a telecommunications service has been accomplished in 2010, but still

the Federal Communications Committee holds back because major broadband internet providers

such as Comcast, AT&T, and CenturyLink will suffer when their monopolies are broken (Why

broadband service is so awful, 2010). Therefore, broadband internet product will be free with the

opening of the free market enabling free competition to free this innovative societal change

product thus freeing product development, product processes, and product differentiations from a

marketing perspective in the United States. Organizations will then find relief from the

marketing challenge of the digital divide when broadband internet operates in the free market.

The United States will no longer lag behind the nations with a free broadband internet.

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