US broadband outlook for 2002: hazy

Although approximately 68 percent of U.S. homes have access to broadband connections, only 9 to 10 percent of those households subscribe to high-speed Internet services, according to research conducted by the Consumer Electronics Association (CEA).

That disparity was one of the central topics during panel discussions and speeches at the Broadband Outlook 2002 conference, held here Wednesday. Members of the telecommunication and media industry, as well as policy makers, debated whether the threat of government regulation, a lack of consumer interest, or deployment glitches are standing in the way of greater broadband adoption across the country.

Most speakers at the conference agreed that something is wrong when only a small fraction of potential broadband users take advantage of the service, which has been in existence in the form of cable modems or Digital Subscriber Line (DSL) connections for about four years. However, CEA offered some hopeful news; the group estimates that by the end of 2002 the number of broadband connections in the U.S. will have doubled to roughly 20 percent of the potential base, said Sean Wargo, a senior industry analyst with CEA.

On the regulatory front, the Bush administration is committed to fostering broadband adoption, said Nancy Victory, assistance secretary for communications and information at the U.S. Department of Commerce's National Telecommunications and Information Administration (NTIA). In fact, Victory shared a rumor with the audience that President Bush may mention the importance of broadband adoption in his State of the Union address scheduled for later this month, though she couldn't confirm the information.

However, just what the administration will do to spur high-speed Internet connections remains unclear. The NTIA is currently working with the U.S. Federal Communications Commission (FCC) to define broadband services and identify potential problems that could require regulation, Victory said, though she declined to specify when such decisions will be unveiled.

The FCC is in the process of examining what role, if any, regulation should play in broadband adoption, echoed Robert Pepper, chief of the FCC's office of plans and policy. He expects that the commission will address these issues within the next few months.

Pepper also put the blame on a lack of consumer interest for hindering broadband adoption.

"It seems to be a demand gap, not a deployment problem," Pepper said, adding that the value of broadband to customers is not crystal clear.

CEA's research, based on a series of Internet and telephone surveys the group conducted, appears to support that theory. Its research shows that the majority of dial-up Internet users are satisfied with their service, making the added expense of broadband - which can sometimes reach twice the cost of dial-up services - seem excessive.

Consumer interest in broadband must be stimulated through awareness, CEA's Wargo said. He applauded electronics retailer Circuit City, which has demonstrated the speed of broadband connections in its stores.

"The key is to get consumers to see what they can do" with high-speed connections, Wargo said.

Another roadblock to broadband adoption is the lack of a killer application, Wargo added. Since the most popular application used on the Internet today is e-mail, which does not demand high-speed connections to be effective, users don't have an incentive to upgrade their service, he said.

Video conferencing in the home could be the application that jump-starts broadband, said Kenneth Ferree, chief of the FCC's cable services bureau.

"Broadband needs to offer mass market benefits, such as improving telephone service (and) video phone teleconferencing," he said.

One executive who works with a DSL provider disputed the idea that poor broadband adoption is the result of lack of demand.

"Getting a choice of providers will drive adoption; today a lot of people don't have a choice" among broadband providers because there aren't enough companies competing in the same market, said Link Hoewing, assistant vice president of Internet and technology issues with Verizon Communications Inc.

There are also technical snags. Current telephone networks weren't designed for DSL, Hoewing added, so companies like Verizon must overhaul their equipment. Currently about half of Verizon's local loops - the connections that link residences to the local phone network - are DSL capable, he added.

Cable companies have their own hurdles to clear in deploying broadband networks. Since broadband traffic travels over existing cable that also carries other traffic such as television programming, there isn't endless capacity, said Thomas Jokerst, senior vice president with Charter Communications Inc.

However, Jokerst disputed the accusation made earlier in the conference that cable companies are limiting broadband capacity because they don't want to facilitate the creation of streaming media Web sites, which could supply video programming to users that competes with the cable companies' programming.

"The answer is no," Jokerst said when asked if the supposition was true. "The reason (for limiting broadband availability) is that we have to allocate bandwidth" for other services as well. Jokerst added that Charter has allocated enough broadband bandwidth to meet demand, and can add more as needed.

More information on the Broadband Outlook 2002 can be found on the Web at http://www.broadbandoutlook2002.com/.

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