Network to Nowhere
GLASSMAN, JAMES K.
Network to Nowhere The broadband problem isn't supply, it's demand. BY JAMES K. GLASSMAN IN A YEAR OF RECESSION, unprecedented terror attacks, and the largest bankruptcy in history, there was...
...But Tauzin-Dingell would deny them the access the Telecom Act mandated, and without that access, CLECs would disappear altogether— and with them any incentive for the Bells to lower prices or expand broadband further...
...part, Rep...
...Verizon more than doubled its DSL base from 540,000 customers at the end of 2000...
...Their sole means of transportation has every incentive to do them in...
...such services are impractically slow when carried over the poky modems most people still use to connect to the web...
...Such ills are almost always a sign that competition is not robust enough...
...That could be a chicken-and-egg problem: Better content may first require more customers...
...home would have broadband service in four years...
...It could enact a tax change to make it easier for businesses to write off capital investments—tech and otherwise...
...These entertainment moguls have formed a frightened, retrograde cartel that's been withholding content from the Internet...
...Here's a worthy project for the Bush administration that would do far more to disseminate broadband than fooling with the 1996 Telecom Act...
...Subscribers to similarly speedy cable-modem services, which got a head start on DSL and provide broadband over the same wires as cable TV, grew 88 percent...
...But being pro-technology does not necessarily entail intervention...
...The chairman of the House Committee on Energy and Commerce, Rep...
...Should deployment be moving even faster...
...TechNet, a Silicon Valley trade association, last month issued a report claiming that, with "widespread adoption of true broadband, . . . the benefits to quality of life are immeasurable...
...Since 1999, Tauzin and his Democratic counterJames K Glassman is a fellow at the American Enterprise Institute and host of the website TechCentralStation.com...
...Broadband revenue grew even more—up 127 percent to $4.8 billion...
...The reason is no mystery...
...And the firms that are doing the job are the selfsame Bells...
...According to the latest statistics, people seem to be adopting it awfully quickly...
...Nor does unbundling deter [the Bell] incumbents from investing in upgrading networks...
...Still, even 400 kilobits is speedy compared to dial-up (a 10-minute download becomes just 90 seconds), and last year, the number of new users of four methods of delivering broadband shot way up...
...If the successful deregulation of long-distance service in the mid-1980s is a guide, the CLECs probably need access to the Bells' networks for only a few more years—enough time to win a customer base sufficient for rolling out their own networks, the way that Sprint and MCI did in long distance...
...Why not more quickly...
...Through ingenuity and perseverance, however, many CLECs have survived and even thrived...
...Nevertheless, the Bells continue to complain to Congress and the White House that they're discouraged from investing in broadband technology because current law allows their competitors to connect (at a price, of course) with the Bell systems...
...And residential subscribers who access the Internet by speedy wireless or satellite increased from 120,000 to 500,000...
...But the battle to free up content should not end there...
...Far from it...
...Perhaps because they don't like what the Internet has to offer...
...Instead of trusting competition, the bill trusts monopolists to get the job done...
...Many CLECs have gone out of business in recent years because they had to rely on cooperation from recalcitrant Bells...
...No one wanted television either, until there were some decent TV shows, and few businesses were attracted to computers until spreadsheet software was developed...
...And, in its most recent earnings report, for the quarter ending September 30, 2001, Qwest Communications (successor to Pacific Bell) reported, "DSL revenue grew approximately 80 percent, reflecting an 84 percent increase in DSL subscribers to 391,000...
...The TechNet folks want a "national policy" to give every American access to 400 to 500-kilobit broadband (fast enough to download a typical Hollywood movie in less than ten minutes...
...But the Bells now have to compete, both for local service and for broadband, with CLECs, or competitive local exchange carriers...
...BellSouth had only 30,000 broadband subscribers as recently as the end of 1999 and only 215,000 in December 2000...
...I guess that, as a technophile, I would be sorely disappointed, but as a believer in free markets and free choices, I would be completely satisfied...
...After the roadblocks come down, it may still be the case that most Americans won't want to sign up for broadband, perhaps because the offerings on the screen aren't particularly appealing...
...Growing at better than an 80 percent clip, broadband is alive and well in the United States...
...BY JAMES K. GLASSMAN IN A YEAR OF RECESSION, unprecedented terror attacks, and the largest bankruptcy in history, there was good news from a surprising front...
...The competitors," wrote Karen Kornbluh of the New America Foundation, "are akin to the Gingerbread Boy of the fairy tale, riding across the river on the nose of the hungry fox...
...Broadband is now available to about 80 percent of Americans...
...Right now, it makes little sense for government to subsidize broadband or otherwise try to ram it down people's throats...
...What else can government do to speed broadband throughout the nation...
...That 1996 law, passed with the support of House Majority Leader Dick Armey and every other congressional free-marketeer, created the blueprint for deregulating the final bastion of the old telephone monopolies—the "last mile," the wire that goes from your house to the greater telecom network...
...But the job is getting done—with-out Tauzin-Dingell...
...But it won't keep growing if the CLECs die...
...More than two-thirds of Internet users still connect using dial-up modems with top speeds of around 56 kilobits per second...
...He is the author of a new book, The Secret Code of the Superior Investor (Crown...
...While many of these roadblocks have been erected by states, President Bush could use his bully pulpit—and more substantive means—to tear them down...
...If the 1996 Telecommunications Act were more vigorously enforced, they would be able to put more downward pressure on prices and upward pressure on service...
...Meanwhile, according to a January 9 news release, Verizon, formerly known as Bell Atlantic, "ended the year [2001] with an estimated 1.2 million DSL subscribers, meeting the company's year-end target on the strength of approximately 225,000 net additions in the fourth quarter...
...The new numbers, however, belie that claim...
...Despite a recessionary environment," wrote Robert Luke, a reporter for the Atlanta Journal-Constitution, on December 26, "BellSouth has met its goal of 600,000 subscribers this year . . . [and] expects to have 1.1 million customers next year, with revenue of $600 million...
...More consumers would sign up, and more broadband-content companies would spring up...
...In a recent article in the Washington Post, Stanford law professor Lawrence Lessig advocated a review of current copyright laws to assure they do not "become a tool for dinosaurs to protect themselves against evolution...
...No evidence has been forwarded to substantiate that claim...
...This sort of redundancy could be enacted simply by an executive order of the president...
...Broadband is an arena of high prices and low quality...
...To be sure, there are some supply-side problems...
...One way the Bush administration and Congress could help—and at the same time enhance national security—is by adopting a requirement that government agencies have at least two separate broadband pipes (one from a Bell and one from a CLEC, for example) into their key facilities...
...Tauzin-Dingell offers a new justification for giving the Bells a clear field...
...After all, many TechNet companies sell the stuff that makes these super speeds possible...
...And it's a legitimate function of government to remove those roadblocks —especially when government creates them...
...That's quite a turnaround, and it seriously undermines the Tauzin-Dingell bill, which rewrites the Telecommunications Act of 1996...
...Many states also prohibit manufacturers from selling automobiles online, and entrenched education interests thwart the growth of the Internet as a tool for taking university courses or other educational programs in the home...
...And DSL technology is available already to two-thirds of the customers of rural telecom carriers...
...Billy Tauzin, has made broadband deployment his top priority...
...Why is broadband so important...
...No one can possibly say...
...But Tauzin-Dingell and other grandiose schemes are beginning to look like solutions in search of a problem...
...The Bells argue that they are deterred from making broadband investments because the law requires them to give CLECs access to parts of their networks—a practice known as unbundling...
...Since it took office, the Bush administration has been trying to figure out how to help extend broadband practically everywhere—both to boost the economy and to show that Republicans are tech-friendly, too...
...Five years later, the last mile is still controlled in more than 90 percent of offices and homes by one of the four Bells: SBC, Verizon, BellSouth and Qwest, which divide up the country but don't compete with one another for local service...
...Licensing requirements, backed by medical guilds, have held up the development of online health diagnosis and treatment across state borders...
...By way of contrast, there are huge investments being made by new entrants in local access markets, where unbundled elements are available, to provide broadband services...
...Federal Communications Commission chairman Michael Powell has noted that "broadband-intensive content is in the hands of major copyright holders"—especially music and movie companies that may appropriately fear Internet piracy but are inappropriately delaying economic progress in the process...
...They dominate DSL, but they wouldn't have rolled it out at all without the spur of competition...
...So the Bells have been lobbying and filing lawsuits to make them vanish...
...Because the next big stage in Internet commerce—a boom in online medicine, telecommuting, distance learning, and video entertainment on demand—depends on it...
...Its premise is that America desperately needs broadband, and that the competition engendered by the 1996 law only holds up progress...
...it's the demand...
...If Americans don't want broadband— especially at today's typical prices of $50 or $60 a month—then it's their own choice...
...But an extensive report by the Organization for Economic Cooperation and Development (OECD), issued in October, found the opposite...
...Still, the more closely you look at the broadband question, the clearer it becomes that the trouble is not the supply...
...John Dingell, have been pushing a bill they say will solve a supposed broadband shortage—main-ly by killing off pesky competitors to the four regional Bell monopolies...
...Sometimes it means removing a few roadblocks and then stepping aside to let markets operate...
...To date," says the study, "the major criticism of unbundling or line sharing [is] that such policies allegedly discourage investment in new infrastructure...
...Nearly all the obstacles are on the demand side...
...Nationally, DSL grew from 2.4 million lines in 2000 to 4.5 million in 2001, three-quarters of them residential...
...Part of the problem is the cowardice and stupidity of Hollywood, but another part of it is law that needs to be brought up to date...
...If one is disrupted in an attack, the other will continue operating...
...Typically, broadband allows speeds of about 400 kilo-bits—though speeds that are 100 or more times faster than dial-up are feasible...
...Still, the broadband market isn't operating as freely as it should...
...The administration is eager to show that it's pro-technology, and that's fine...
...During 2001, the number of American homes and offices that hooked up to the internet using fast broadband technologies like cable and digital phone lines roughly dou-bled—from 6.5 million to 12.5 million...
...Such statements may sound hyperbolic, but they carry a political punch...
...Subscribers to digital subscriber line (or DSL) technology, which juices up copper phone lines to broadband speeds, increased 87 percent...
...In October, SBC Communications (the old Southwestern Bell) reported that it "has made its DSL Internet service available to more than 23 million homes and business locations today, which represents more than 55 percent of SBC customers...
...If this pace were to continue, every U.S...
...For example, BellSouth recently announced that it had nearly tripled its subscriber base in a year and that new remote terminals make DSL service available to 70 percent of the households in its region...
...Since 1998, the report continues, "CLECs have invested $50 billion in network infrastructure in the United States...
...The company predicts that its broadband business will become profitable as early as 2003...
...But beyond that, there's not much to do...
...There are roadblocks that stop consumers from getting what they want...
...He's already been instrumental in preventing the worst of all roadblocks—Internet taxes, which the states would dearly love to impose but which have been barred by an extended moratorium...
Vol. 7 • February 2002 • No. 21
