XBiz News: 09-18-03

Stephen Yagielowicz

This week’s XBiz’ Industry News takes a look at the worldwide growth of broadband access, popular media’s fascination with the world of porn, and legislative efforts to ban Internet access taxation…

Worldwide Broadband Access Grows
According to the International Telecommunication Union (ITU), an agency of the United Nations, broadband Internet access is growing quickly, with a 72 percent increase in 2002 bringing the number of high-speed Internet service subscribers to 63 million.

The Asian market leads the way, with Korea claiming the number one spot in broadband penetration, with an estimated 21 broadband subscribers for every 100 inhabitants. Hong Kong (China) is second with around 15 broadband subscribers per 100 inhabitants, while Canada comes in third with around 11 broadband Net subscribers per 100 inhabitants. The U.S. places 11th worldwide, with 6.9 subscribers per 100 inhabitants.

According to the ITU, global broadband demand is being driven by home users, who most commonly have Digital Subscriber Line (DSL) technology (a 59% market share), with cable modem services in second place (a 39% market share), and a variety of other platforms such as satellite and wireless networks making up the remaining 2% of broadband access.

While the prospect of marketing to 63 million broadband users seems hopeful, this audience is a fraction of the non-broadband community, currently at 1.13 billion fixed-line users and 1.16 billion mobile phone users.

Welcome to California
Porn, especially online porn, is increasingly in the headlines, and not simply because another pervert was arrested for downloading illegal child porn, or because a handful of porn mongers wanted to be governor of California, but because the general public has an interest, both in the product, and the producers.

This interest will once again spill over onto the small screen, as HBO has begun a new 6-part documentary series called “Pornicopia: Going Down in the Valley.” An in-depth examination of the estimated $10 billion porn industry’s ‘ins and outs,’ the investigative series will focus on the San Fernando Valley; California’s long-time home for porn production.

While still controversial, sexually-oriented programming and ‘sex industry’ documentaries are not new products for HBO, whose groundbreaking “Real Sex” series has always been a popular (if on occasion, disturbing) addition to the cable giant’s lineup. In fact, in this author’s household, there is nothing quite like the familiar, light-hearted “Real Sex” opening music to bring my wife dancing into the room like Barbara Eden in “I Dream of Jeannie,” such is the show’s appeal.

Given the popularity of “Family Business,” competitor Showtime’s sexy late night ‘reality show’ featuring Adam (Seymour Butts) Glasser, along with his feisty mom and cousin, as they work through the day to day problems and possibilities of life at the top of a porn empire, HBO had to come up with something equally compelling to satisfy this market demand, and “Pornicopia” might just be it. Look for upcoming show dates. Bipartisan legislation making permanent the existing temporary ban on taxing Internet connections was passed by the US House of Representatives on Wednesday.

A Tax-Free Internet?
Bipartisan legislation making permanent the existing temporary ban on taxing Internet connections was passed by the US House of Representatives on Wednesday. This vote comes well before the November 1st expiration of the temporary ban which has been in effect since 1998, and contains updates clarifying that any and all types of Internet access systems, from dial-up to DSL to cable and beyond, cannot be taxed.

According to Rep. Chris Cannon (R-UT), “This bill would broaden access to the Internet, expand consumer choice, promote certainty and growth in the IT (information technology) sector of our economy and encourage the deployment of broadband services at lower prices.”

Acknowledging the success of the original moratorium, and hoping to increasing Internet access by limiting costs, including access taxation, Rep. Christopher Cox (R-CA) added that “It’s just a little bit too expensive for a lot of people. A nickel here, and a little bit of nickels and dimes here, would add up to a serious amount of taxation for most people.”

It’s not a one-sided story, however, as the National Conference of State Legislatures estimates an $80-$120 million dollar annual tax revenue loss for the nine states currently imposing a tax on Internet connections. Rep. Gene Green (D-TX), opposed the bill, claiming an annual $45 million tax revenue loss for Texas, saying “I don't need to remind my colleagues of the fiscal crisis that our states are currently finding ourselves in, including the state of Texas.”

It’s important to realize that this legislation only covers Internet access, not sales taxes on hard goods purchased online, an issue which will come up next week as state governments get together to coordinate plans to facilitate state sales tax collections on online sales.

Stay Tuned for more XBiz News from The Industry Source ~ Stephen