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Thread Index [isp-marketing] fyi commentary: Behind In Broadband
"What helped the rollout of broadband in Korea and Japan were
not massive government,
subsidies as some believe, but policies that allowed vigorous
competition."
We need some in the USA too, but we probably 'ain't gonna get any' as
things stand
BusinessWeek Online
Commentary: Behind In Broadband
Friday August 27, 3:58 pm ET
Love. Tears. Romance. Like millions of other Japanese, Midori Kato has
been transfixed by the Korean soap opera Winter Sonata. But the
42-year-old freelance editor started watching the weekly drama even
before it became available on broadcast television in April. Instead of
watching on her TV, she logged on to the Web over a blazing
100-megabit-per-second broadband link. The video is just as crisp as her
TV screen, right down to the tears on heroine Choi Ji Woo's cheeks. "I'm
hooked," Kato says.
Don't expect to share in the travails of Winter Sonata's lovers anytime
soon. That's because the U.S. is becoming something of a broadband
backwater, a place where almost no one can do what Kato and millions of
other Japanese take for granted. Many Americans may think that the U.S.
is making progress because the number of broadband Net links continues
to climb, but that misses the bigger picture.
The U.S. has steadily fallen behind other nations, both in terms of the
share of the population with broadband and the speed of those
connections. Consider this: In 2000 the U.S. ranked third in broadband
penetration among the nations in the Organization for Economic
Cooperation & Development. Last year it dropped to 10th place. That's
behind recognized leaders such as Japan and Korea, as well as countries
like Belgium and Canada. "It's ridiculous that the U.S., of all places,
is so far behind in this key measure of economic development," says Tim
Johnson, publisher of London's Point Topic, which analyzes world
broadband trends.
At stake are more than just the bragging rights. Broadband is the
foundation upon which entire new generations of technology will be
built: full-motion video, Web-based medical care, more sophisticated
Internet telephoning, and online gaming. Already, companies abroad seem
to be using their robust broadband markets to gain an edge on U.S.
rivals. Korea's NCsoft Corp. has come out of nowhere to become a tough
contender in multiplayer online games. The City of Heroes game it
launched this year has become one of the most successful online games in
the U.S., while competitor Electronic Arts is struggling to create a
multiplayer hit. "Given its experience in Korea, NCsoft may have an
edge," says analyst Joseph Laszlo of Jupiter Research.
That's why the U.S. is in dire need of stronger leadership in broadband.
The country is alone among developed nations in not having a
comprehensive broadband plan. Both President George W. Bush and
Democratic Presidential candidate John F. Kerry have pledged to tackle
the issue after the election. But so far, their proposals, such as
refraining from taxing consumer Web-access services, are modest.
Worse, current U.S. policies have the country moving backward. Look
closely at the evidence: What helped the rollout of broadband in Korea
and Japan were not massive government subsidies, as some believe, but
policies that allowed vigorous competition. In particular, those
countries forced the incumbent phone companies to let startups use their
networks at reasonable, government-set prices. Those startups,
especially Hanaro in Korea and Yahoo! BB in Japan, waged fierce battles
against giant rivals, driving prices down and speeds up. "Competition is
the No. 1 (reason) why one country grows faster than another," says Sam
Paltridge, the OECD's telecom analyst.
On this score, the U.S. has blown it. This summer the Bells won an
eight-year battle to stop competitors from using their networks at deep
discounts. That prompted AT&T (NYSE:T - News) and MCI Inc.
(NasdaqNM:MCIP - News), which had been using the Bells' lines, to
retreat from the consumer markets. "The holy jihad war of telecom
between the incumbents and the competitors" has delayed broadband in the
U.S., says former U.S. Federal Communications Commission Chairman
William E. Kennard, who favored the Bells' leasing obligations. Now,
most markets are cozy duopolies, at best, where consumers can get
broadband only from a phone or cable company. The result is that U.S.
consumers can pay $35 or more for a 1.5-megabit-per-second connection,
compared with Yahoo! BB's price of $25 for 26 megabits.
To have any hope of joining the world's broadband vanguard, the U.S.
must create a viable third competitor. The options are few. Congress is
unlikely to force politically powerful Bells to share their networks,
even though lawmakers are expected to rewrite the telecom industry's
regulations next year.
Much more promising is the rivalry that might be sparked by new,
inexpensive wireless technologies. Chief among these is WiMax, expected
to be available next year. WiMax is expected to zip bits through the
airwaves as fast as 75 megabits per second and cover areas as wide as 30
miles. Because the equipment needed to cover a small city can cost as
little as $100,000, WiMax could open the door to a stampede of
contenders. Already, it's winning the backing from the likes of chip
giant Intel Corp. and cellular pioneer Craig O. McCaw.
Bush and Kerry both favor making airwaves available for the new
technologies, but there's one hitch: The best radio spectrum for
wireless broadband isn't available. It's being used by TV broadcasters
for analog transmissions. The broadcasters have been given another set
of airwaves, for digital TV, but they're not eager to forfeit their
freebie. If Bush and Kerry want wireless technology to spark more
competition, they'll have to make the politically difficult step of
taking on the powerful broadcasters.
Rural Reach
Federal and state governments can provide other incentives to create a
third rival. One way is for lawmakers to pass a bill now pending,
sponsored by Senators John D. Rockefeller IV (D-W.Va.) and Olympia J.
Snowe (R-Me.), to let companies expense equipment costs when they build
networks of at least 20 megabits a second. A U.S.-backed bond program
would encourage municipalities to build their own fiber networks and
then lease them to upstarts. And government can attract broadband to
sparsely populated regions without tax dollars by creating pools of
local buyers -- a measure Canada has adopted to reach its vast rural
expanses. For instance, a U.S. Veterans Administration hospital, acting
as an anchor tenant, could corral a group of local businesses and
nonprofits to entice a phone, cable, or wireless company to serve them.
There are plenty of U.S. defenders who say the nation need not fret.
After all, broadband is becoming more widely used. And the Bells are
promising to build faster networks. Verizon Communications Inc. (NYSE:VZ
- News) is spending billions to install fiber lines as fast as 30
megabits per second in 3 million households by the end of 2005. Plus,
some argue that other countries have an advantage in broadband because
their populations are more densely packed and therefore cheaper to
reach.
But excuses never make good policy. If the U.S. is not to lose out in
the global race for the next-generation Internet and the new businesses
it can spawn, change is needed. The country must create vigorous
competition to drive the low prices and high speeds that can usher in a
prosperous broadband economy.
Guy L. Decatrel
VP of Sales and Marketing
Brand X Networks
www.brandxnet.com
559 420-5220
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