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Advocacy Article

The Impact of Broadband Speed and Price on Small Business

The purpose of this study is to explore the ways in which small businesses access and use highspeed Internet services, and to evaluate the importance of broadband speed and price for small businesses. The U.S. Small Business Administration’s (SBA) Office of Advocacy (Advocacy) is required to conduct this study under Public Law 110-385, Sec.105. Advocacy selected a small business that specializes in this field—Columbia Telecommunications Corporation (CTC)—to conduct this research.

Highlights include:

  • Holding prices constant, rural small businesses get less service when compared to metro small businesses; holding services constant, rural small businesses paid higher prices than metro small businesses.

  • Metro small businesses pay on average $115 for Internet service, while rural small businesses pay $93.

  • Rural small businesses pay significantly higher prices than metro small businesses for the same bandwidth, and small businesses in metro regions have access to higher bandwidth services than rural businesses do (at higher costs).

  • Approximately 71 percent of the small businesses surveyed had a website.

  • Metro small businesses would readily move to have access to better services, but rural businesses do not have that flexibility.

  • DSL is the dominant small business Internet connection type. The exception is the Northeast, where over half the respondents have cable modem Internet connections.

  • The authors compared their results with 2003 surveys published by the Office of Advocacy. They found that dial-up use dropped overall from 44 percent to 6 percent. Monthly prices for leased T1 lines, on the other hand, increased from $121 to $294, $28 to $70 for wireless, and $60 to $88 for cable.

  • Approximately 15 percent of the small business respondents use voice-over-Internet-protocol (VoIP), compared with 3.3 percent in the 2003 study. Of those using VoIP, 80 percent use an external connection, and 20 percent rely exclusively on an internal LAN.

  • Several case studies examined local service and pricing. Most notably, the case study comparing the prices paid by small businesses and residential Internet consumers in Minnesota and Tennessee found that small business Internet customers pay two to three times what residential Internet customers pay for equivalent speeds, irrespective of the community under analysis.

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