Confronting the Harsh Reality of Broadband

ASPEN, COLORADO -- Imagine that broadband is widely available in homes. Millions happily pay subscriptions to watch movies on demand and listen to music online, while corporations do more to encourage telecommuting and remote business activities because of the ubiquitous availability of always-on, high-bandwidth connections.

That's the vision that has been at the forefront of this year's Aspen Summit, and it has been a powerful tonic for the high-tech executives and policymakers hung over from the dot-com bubble burst and economic slump.

But this vision is confronting a harsh reality.

High-speed connections, via Digital Subscriber Line, cable modems, and satellite, reach less than 10 percent of all Internet-connected homes, and new adoption of the services may be stagnating or growing slowly.

Mass-market adoption of broadband at a percentage that's large enough to generate an economic stimulus by prompting companies to offer new kinds of Net-based services may still be years off, say those involved with its deployment.

Broadband is also involved in an ugly legislative battle in Congress that's pitting telecommunications companies against one another, with consequences for broadband's rollout.

A Legal Battle

The former Baby Bell telephone companies complain that the federal Telecommunications Act of 1996 is deterring broadband deployment. The act, which required the regional Bells to open their networks to voice competition, is being wrongly applied to broadband, said Tom Tauke, senior vice president at Verizon Communications.

"Competitors use our facilities at rent-control rates and do so without investing a dime of their money," said Tauke, speaking at the conference, which was sponsored by the Progress and Freedom Foundation.

Tauke said Verizon is investing less in broadband then it might otherwise because it can't get the investment returns it makes on other services, such as wireless.

But David Dorman, president of AT&T, charged that the local Bells "are engaged in a major offensive to dominate the broadband" and are attempting to "eviscerate" the telecom act that ended the local telephone monopolies. AT&T needs to lease local loops from the regional Bells for its DSL service.

Dorman said the bill introduced by Representatives Billy Tauzin (Republican-Louisiana) and John Dingell (Democrat-Michigan), known as the Internet Freedom and Broadband Deployment Act of 2001, and a similar measure in the Senate, which was intended to reduce some of the legislative burdens faced by the Baby Bells, would "wipe out" AT&T's investment in DSL as well as that of other competitors.

Bringing Users Online

But resolving the legislative issues alone won't necessarily spur consumers to pay the costs involved in getting high-speed access unless they have a good reason.

"What is it that will get consumers to go out and buy this stuff?" asked Gary Shapiro, president and chief executive officer of the Consumer Electronics Association, a Washington, D.C.-based trade group.

In the view of some content providers, the big lure to broadband will be movies, interactive games, and music.

"The movie industry welcomes the Internet," said Jack Valenti, president and chief executive of the Motion Picture Association of America. "It has vast potential to be a wonderful new delivery system," provided, said Valenti, that copyright protections are in place.

Konrad Hilbers, chief executive officer of Napster, the file-sharing service that was shut down by a federal court until it stopped the sharing of copyrighted music, has the goal of turning this Redwood City, California-based company into a "legitimate business."

Napster plans to launch a subscription-based model for music later this year. It hasn't decided what to charge, "but it is quite obvious that we are challenging some of the music industry's business model, most particularly on CD pricing."