IP: The Broadband Economy

[David Farber <dave () farber net>]

December 10, 2001
The Broadband Economy
By KAREN KORNBLUH
<http://www.nytimes.com/2001/12/10/opinion/10KORN.html?todaysheadlines>

[W] ASHINGTON -- A resource crucial to the economic recovery of the United 
States is buried underground. Hundreds of thousands of miles of fiber-optic 
cable, which enables the fast, robust communication that was so important 
to the economic success of the last decade, currently lies unused, the 
digital equivalent of fallow farmland.

America needs to put this asset to work. Broadband - the generic term for 
high-speed, high-capacity, always- on data networks - is integral to the 
improvement of the American economy. To help businesses and consumers gain 
access to this technology, Congress and the administration must come up 
with a bold broadband strategy - and avoid the quick-fix solution that 
would rely on the powerful regional Bell telephone companies.

The story of broadband is one of arrested development. In the last decade, 
investors plowed $90 billion into the construction of a cross-continental 
fiber-optic broadband network. Today, a mere 3 percent of that backbone is 
in use. The other 97 percent remains dark because only 10 percent of homes 
and smaller businesses are connected to it. The rest await access but have 
been frustrated by the cost and difficulty of upgrading the local telephone 
networks, which are still owned by the Baby Bells - Verizon, SBC, Bellsouth 
and Qwest - left from the 1984 breakup of AT&T.

The deployment of broadband, along with the Telecommunications Act of 1996 
and the commercialization of the Internet, helped fuel the economic boom of 
the 1990's. Investors not only financed companies that built the 
long-distance fiber network; they also created dozens of new companies 
dedicated to delivering broadband to homes and smaller businesses. Large 
businesses built their own dedicated data connections and used them to 
improve efficiency in inventory control, purchasing, sales and 
manufacturing processes.

But then the information revolution stalled. What the entrepreneurs failed 
to foresee was the enormous difficulty and cost of upgrading the last mile 
- copper telephone wires that connect individual homes and small businesses 
to the broadband backbone.

Laying a second line to these customers can cost $1,500 per customer. But 
under the law, these new broadband start-up companies had another option: 
they could install their own equipment in existing Bell offices, allowing 
existing copper wires to handle more traffic, for example. When they tried 
to, however, they often encountered logistical obstacles.

Today, many of the new broadband competitors are out of business, leaving 
the incumbent Bells - and in some areas the cable companies - as the 
dominant broadband providers. Broadband prices, which had dropped with the 
advent of competition, are up, and deployment has slowed.

Without broadband, small businesses are unable to boost productivity the 
way their larger counterparts did in the late 1990's. Nor will Silicon 
Valley be able to reach a critical mass of customers for its newest 
applications - from online doctor visits to high- quality video 
conferencing and interactive television. Without mass access to broadband, 
businesses of all sizes will not want to invest in a host of 
productivity-enhancing technologies.

<snip>


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