What happens to broadband in a slowdown?

Ian Fogg of Jupiter Research has been musing on how the slowdown (we won't use the "R" - or even "D" - word*) is going to affect broadband.

Looking across Europe, he thinks that in countries where there's been a housing slowdown, it will have some benefit for broadband operators because it will make retention easier - when people move, they are more likely to bin their supplier: "moving home is a key decision point in life when consumers are forced to reconsider what services they take." And since the number of houses being sold is at truly dramatic lows in the UK, a lot fewer of those decisions are being made.

Next, broadband and pay TV will resist the slump - they're integral to our lives:

Few consumers will wish to end home broadband access if they have time on their hands and need to job hunt, or have renewed impetus to use the Internet to bargain hunt for cheap deals on utilities or retail. Similarly, consumers with more time, will have more time for entertainment, although I do see consumers becoming more likely to switch down to cheaper packages with the same operator, especially where they pay for premium channels.

One could even expect that if you lose your job, you'll need your connection more than ever to hunt for a new one - or to make some sort of money on the side. Broadband then becomes a need, not a want - quite a turnaround from the last slowdown of 2000/2001, and we didn't have t'interwebs in 1991/2. (Then it would have been a computer and a phone line. It was for me.)

But with the "commercial paper" market - the one that big telecoms companies use to raise funds comparatively cheaply (much more cheaply than getting a loan from the bank) almost closed, capital spending is going to be in trouble:

Fibre roll outs will take many years, rather than a few years. Current DSL and cable will dominate for longer. The result is that current home broadband networks will have to last. Product managers must become more creative with packaging and adding new features cheaply. In mobile, the much heralded WiMAX networks may never launch in Europe: WiMAX has, perhaps, a small window of opportunity after which cellular mobile broadband will be ubiquitous. If they miss that window, WiMAX will be in trouble.

It's certainly going to be interesting to see what BT has to say about the rollout of its 21CN (21st century network that will be the internet-like backbone of the phone network) and of its ADSL2+ product.

When we wrote about BT's ADSL2+ plans in April, we were told that

By summer 2009, BT will have enabled around 850 exchanges serving up to 13 million users (it has around 5,500 UK exchanges) and aims to complete the "vast majority" of the work by 2011.

Have to wonder if that will still be true, given the cost of upgrading exchanges.

But now the key question: if speeds don't go up, will prices go down? Probably not, he says; stable sounds like the way forward. But any extended slowdown will weed out the weak or unsustainable players:

We will see a weeding out of free, advertising-supported, and even some paid services that are not delivering financially. This opens opportunities for competitors with a better business model to clean up. I see a lot of the online video services at risk here, as well as some telecom operator IPTV services and cable provider free video on demand services, but there are many others too.

So it's a mixed picture - mostly, the ball is in the broadband providers' court, and they don't even have to deal with toxic assets. Maybe that's the place to put your hot money.. if you managed to get it out of that Icelandic bank.

* if you want to read about ways to define recessions, read the very good Economist artlcle. Fogg referenced it, though I'd seen it before. Talking point: the definition of "two quarters of falling growth" was introduced by economists for then-President Reagan in the 1980s to evade the idea that the US might have moved into recession.