In the early days of the Internet, the cost and availability of broadband access, led to the so-called digital divide. The digital divide was the gap between those geographic areas that benefitted from high-speed Internet and could afford it, with those mainly lower income areas that did not have access to the fledgling web.

Since that time the U.S. has fallen behind several nations in broadband penetration and connection speed. Strategy Analytics reports that the U.S. in 2008 ranked 20th among all nations in household broadband penetration with 60%. By comparison, South Korea ranks first at 95%, the Asian nation benefits from a highly urbanized population and a government supported broadband strategy. In fact, many of the leading countries in broadband penetration tend to be small and mainly urbanized such as Singapore (88%), the Netherlands (85%) and Denmark (82%). However, residents in larger geographic nations (albeit with a small population) such as Canada (76%) and Australia (72%) also have a higher broadband penetration. The report estimates that the U.S. will drop even lower to 23rd place in 2009.

Moreover, according to Wired magazine, the average broadband connection speed in the U.S. is less than five Mbps, much slower than the average connection speed in Japan which is 63.3 Mbps. Japan’s broadband penetration is also higher than the U.S. at 64%.

One of the campaign promises of President Barack Obama was to provide broadband penetration in underserved regions across the U.S. to strengthen the economy and provide jobs. As part of the economic stimulus package, $6 billion was allocated to improve the availability and infrastructure of broadband.

Even if broadband becomes ubiquitous, it is doubtful that everyone would subscribe. A survey by the Pew Internet & American Life Project released in January 2009, found broadband penetration is about 60% however, a total of 91% of all U.S. homes do have broadband access. The report also found that about one-third of Americans, if given the opportunity, would still not subscribe to a broadband connection due to the cost. Many dial-up subscribers would prefer not to spend more than their current monthly cost for a high-speed connection. A few analysts estimate that for broadband to become widespread, a monthly fee of no more than $10 would be required. Hence, since cost remains a factor the digital divide while smaller still exists.

Meanwhile as more eyeballs migrate to the Internet, several media companies are grappling with a strategy that would better monetize content from the web. In July 2009, The Walt Disney Co. announced plans to introduce movies, television shows and video games on a subscription basis. Disney management indicated that consumers would be willing to pay a subscription fee if they believed they were getting value. The New York Times has reportedly been mulling over the possibility of charging subscribers a discounted $2.50 monthly fee to access their website. Non-subscribers would pay $5.00 per month. Other newspaper publishers are also exploring various revenue opportunities with their websites, including The Hearst Corp. and E. W. Scripps. Both are reportedly looking at their website as a potential revenue source. The Wall Street Journal, owned by News Corp., does charge for some of its content. News Corp. chairman Rupert Murdoch indicated that this online strategy will extend to other corporate properties including Fox the New York Post among other global holdings.

Online videos are also eyeing the web as a revenue source, as people continue to migrate to the Internet to watch programming. According to The Wall Street Journal, TNT’s The Closer, one of cable’s most watched original programs, is testing the idea of providing the same commercial load online as it does on television, a fourfold increase in ad time. The networks contend they cannot give away premium programming with limited commercials and operate a sustainable business. Despite a potential pushback from online viewers, many networks would like to see broadband video, at the very least, resemble television economically.

The largest cable operators Comcast and Time Warner are also exploring a business model to make cable programming accessible online. The plan is to use a password to protect the content for existing paid subscribers of either cable or satellite companies.

Consumers continue to spend more and more of their dollars and time on media and technology. In Veronis Suhler’s most recent annual study on media, it reported that for the first time (and despite the recession) people spent more time with consumer supported media (e.g., subscription, etc.) rather than with free (mostly broadcast) media.

As consumers spend more dollars on subscription based media, the strategy of providing universal broadband access could derail. The cost could be too high unless it was subsidized by the government, an unlikely scenario.

Additionally, as online content providers experiment with a subscription based model, only those with the financial means will be able to afford to access the new premium rates. This separation will introduce a second digital divide or Digital Divide 2.0.

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