Broadband and the Beast

"Open access" regulations may delay faster Internet connections.

Ryan H. Sager from the January 2000 issue

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Steve Cohen, a spokesman for the openNet Coalition, emphatically denies that there's choice available in broadband access, saying, "I think the consumer should have the same freedom of choice and opportunity that they have right now with dial-up" Internet access. While such rhetoric pushes the right consumer buttons, it ignores Kennard's trenchant observation: While most Americans don't have broadband access, there is a growing range of options in the marketplace.

Though open access proponents discount non-cable-based broadband methods, many of these technologies are making significant inroads. DSL--a broadband technology that can run over upgraded traditional copper wires--used to be an expensive alternative but has come down significantly in price. U.S. West, a regional Bell operating in 14 Western states, now offers DSL Internet access for as low as $20 a month. The highest speeds cost more (about $40 a month), but even the slowest DSL is three times faster than a conventional 56K dial-up modem. In July, there were about 92,000 DSL subscribers in the U.S. That number is expected to rise dramatically over the next three years. Spurred by the threat of cable modems, all the Baby Bells have announced plans to start selling DSL, and industry analysts predict that there will be roughly 94 million DSL lines available by 2002.

There are also wholly wireless ways to get broadband access. "Terrestrial wireless," similar to cellular phone networks, is an idea that is actively being pursued by companies such as Sprint and Motorola. Sprint has already started offering a terrestrial wireless "Integrated On-Demand Network," which provides voice, broadband Internet, and video. Motorola and Sun Microsystems are teaming up to invest $1 billion in infrastructure for wireless digital networks with similar capabilities. Both of these ventures will at first be aimed at small and medium businesses but are expected to be available to residential customers within five years.

Aside from terrestrial wireless, there is also satellite. Comparable in price to DSL and similar to TV services such as DISH Network and DirecTV, satellite services offer residential consumers who have room for a mini-satellite dish access to the Internet at eight times the speed of a traditional modem. At this point, the dishes cost around $250, though prices are dropping regularly. Monthly service fees start around $20 and increase based on usage.

Not only are these wireless technologies viable, but for rural markets they are often the only choice. Cable tends to have weak or nonexistent market share in rural areas, and even DSL is unavailable to customers more than 18,000 feet away from a telephone company central office. Indeed, wireless technologies are so attractive that AOL has invested heavily in both, making a $1.5 billion deal with satellite provider Hughes Electronics Corp. and entering into partnerships with Bell Atlantic and SBC Communications.

So, contrary to the claims of open access advocates, the broadband market is in fact robust with prices falling and services improving. In fact, about the only thing that could go wrong at this point would be for excessive new regulations to stunt the growth of this promising new sector of the economy.

Lawrence Gasman, president of Communications Industry Researchers, a consulting firm that assesses the commercial impact of new information technologies, sees regulation as a potential disaster that would discourage investment in new and competing technologies. He points out that there are a number of unresolved issues on the technological side. No one, he says, is quite certain if the technology exists to allow more than one ISP to share the same network, and there are large questions regarding network administration. While Gasman stresses that these questions will be answered, he suggests that ham-handed regulations of access and pricing will slow down development of broadband.

"If you tell a cable or a Bell company that on top of all the problems they're having implementing a new system, they're going to have to deal with opening it to anyone else--that might be a real discouragement to creating a network in the first place," says Gasman. "The concern that there won't be enough competition is misplaced. If there's no network, there's no competition."

If the argument sounds far-fetched, it isn't. AT&T has already made it clear that those cities which impose burdensome open access requirements will be the last to see broadband. The company is not simply being vindictive, but recognizing that it will not make as much money in cities where other ISPs have a claim to the networks it is building.

As the FCC has argued in an amicus brief on behalf of AT&T in the case before the 9th Circuit, the most sensible policy in this area is to leave the market to progress on its own. Local control could only wreak havoc on an important framework that is just now developing. Maximum investment in broadband only will come when companies interested in investing in this technology can be assured that they will retain the rights to the networks they are creating.

That's especially true since, at this point, no broadband technology is truly dominant. Cable seems to have the lead for now, but billions of dollars are being poured into competing formats precisely because what will dominate is far from clear. AOL and the other ISPs in the openNet Coalition, then, haven't been shut out of the broadband market. They just dislike how much it's currently costing them to enter it. But in lobbying local governments to grab a share of the broadband pipe rather than getting on with the actual building of it, open access advocates may be slowing down the one thing they profess to care about most.