Broadband Benches ‘Field of Dreams’ Model

BOSTON — It wasn’t that long ago that service providers took a “Field of Dreams” approach to broadband deployment, said Mark Uncapher, a senior vice
president and counsel for the lobbying effort Positively Broadband.

But with adoption rates for U.S. homes and small businesses stalled (between 11 percent and 16 percent depending on whose numbers you use), even Uncapher’s
clients concede that the “build-it-and-they-will-come” model isn’t enough anymore.

But what is? Unfortunately, there is no one answer. Improving subscription rates for digital subscriber line (DSL) and other high-speed services will require a complex
alchemy of supply, demand, competition and regulation, experts said during panel discussion at Next Generation Networks 2002 trade show this morning.

In addition to Uncapher, panelists included Charles Hoffman, president and CEO of Covad Communications , and Michael Gallagher, a deputy secretary at the U.S. Trade Commission.

First, a misperception must be cleared up. At this point in its development, broadband penetration is similar to that of telephones, TV and VCRs. It is not however,
being embraced as quickly as dial-up Internet access, nor as quickly as analysts had predicted.

“Internet access took off because the social and economic benefits were so obvious,” Uncapher said.

One of the challenges is giving users a reason to upgrade; faster e-mail is not compelling enough. One selling point has been telecommuting, where quicker data
transfers help employees be as productive at home as they are in the office. Other applications that could be attractive include tele-medicine and distance learning.
Music and videos delivered over the Internet will eventually help, but not until an agreement is reached over copyrights.

Unsurprisingly, Hoffman, who has spent the last five years hauling incumbent carriers into court to answer anti-trust allegations, sees increased competition as key
to fulfilling the promise of broadband.

While calling the 1996 Telecommunications Act essentially sound, Hoffman would like to see teeth added to the deregulation law. For example, some of the fines
risked by Baby Bells for not opening lines amount to a pittance.

“It’s better for (the offenders) to be fined than to open up their lines to competition,” said Hoffman, whose company emerged from Chapter 11 bankruptcy protection
and recently signed a partner deal with AT&T.

Hoffman would also like to see the federal government offer financial incentives to encourages service providers to make capital investments. Such a move would
bring high-speed access to under-served areas.

For his part, Gallagher, on behalf of the Bush administration, espoused a hands-off approach. Having passed the initial telecom deregulation legislation, however
imperfect, the government should let consumers decide which services are essential and how much they are willing to pay for them.

“As long as we have a situation that rewards innovation we will be fine in the longterm,” Gallagher said, when asked if the United States risked falling behind
countries with higher broadband adoption rates, namely Canada and South Korea.

It’s clear that the government isn’t buying the argument by some in the industry that millions of taxpayer dollars to widespread broadband access and maintain the
country’s economic advantage.

But that doesn’t mean Washington isn’t doing anything to address the situation. Rather, the steps are taking are more measure, if less dramatic, than sending sweeping
legislation up to Capitol Hill. One area where the government does have a hand is in management of the spectrum — which carriers wireless traffic to and from cell
phones, PDA and pagers.

Regulators are considering doubling the spectrum used by devices that support the 802.11 wireless standard. That combined with new “smart
antennas,” which help cut interference, should help alleviate the crush for wireless bandwidth, Gallagher said.

Despite the current frustrations, panelists agreed that broadband will continue to gain acceptance. Hoffman predicted that next year the number of broadband users
would outnumber narrowband users.

“It’s a question of education,” Hoffman said. “We are seeing dramatic growth in Q3 and Q4. “I think we’re getting there.”

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