1. THE DIGITAL DIVIDE
A MARKETING CHALLENGE FACED BY ORGANIZATIONS
MAY 4, 2014
MBA 506
Nancy Southerland
2. 1
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
3. 2
(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
4. 3
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,
5. 4
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
6. 5
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
7. 6
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
8. 7
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.
9. 8
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
10. 9
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.
11. 10
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
12. 11
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.
13. 12
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