The News – 10/29/02
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In this Issue:
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Recommended Reading
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I realize this is the
only newsletter you’ll ever need, but if you want more
in-depth detail, check out:
Stan Hustad’s
The Coaching Connection
Management Signature's
The Express Read
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If you deploy it, will they subscribe?
The second part of the Why You Need to Get Hip to HIPAA
series will appear in a future SNS
Technology Network (Tech Net), a leading tech sector lobbying
group, is asking the US government to guarantee 100 megabits
per second (Mbps) connections for 100 million US homes and small
businesses by the end of this decade. (Interestingly, Tech Net’s
former URL is now for sale: www.technologynet.org. What’s that all
about?) This and similar solutions to the problems of the broadband
industry, and the tech industry in general, assume that consumers
need it, they just don’t know it yet.
This is rather obviously not true, at least yet. The FCC says
broadband access is available to 75 to 80 percent of US households
yet only 7 percent subscribe. Sounds like if you build it, they’ll
ignore it. (I’ve addressed this question in SNS before.)
In my opinion, the Field
of Dreams approach to technological innovation won’t work
for broadband. Lowering the price will. It’s hard to understand
why the broadband industry doesn’t get this, but, with the cost
of a truck roll heading north of $600, it is easy to understand
the problems with their revenue model: Even at $50 a month,
it’s likely to be a couple of years before a company recoups
the installation investment. To reduce the price to the $20
level that would kill the dialup competition means extending
the payback period significantly.
That’s why broadband companies must take the longer view, as
satellite companies such as EchoStar
have done. EchoStar will give you the equipment and install
it (for free or nominal fee) because they’re banking on you
keeping it for the long run. They’ll even install a new dish
on your new home should you move, leaving the old one in place
for the new owner.
An even longer view is taken by public utilities in Washington
State, discussed in a previous SNS. Because electric,
water, and gas companies are used to decades-long paybacks for
things like dams and electric plants, taking on an investment
of $120 million to lay fiber to the home (FTTH) in a rural county,
as the electric utility in Grant County, Washington did, isn’t
seen as the same kind of big deal as it would be in high tech
circles.
Now you can argue that broadband companies don’t have access
to capital on the same terms as well-established public utilities,
and you’d be right. You’d also be right if you said that public
policy could help in this area. Perhaps government-backed low-interest
loans to broadband network builders would get more networks
built.
But that won’t solve the question of consumer demand. Remember,
80 percent of homes can get broadband now, but only 7 percent
have signed up. The FCC's Third Report on the Availability
of High Speed and Advanced Telecommunications Capability
concluded more than 70 percent of homes have cable modem service
available, 45 percent have digital subscriber line (DSL) service
available, 55 percent have terrestrial fixed wireless broadband
available, and almost everyone can purchase satellite-delivered
broadband.
The key finding in the FCC report, however, is that, “cost
appears to be closely associated with the number of consumers
willing to subscribe to advanced services.” One private-sector
survey found that 30 percent of online customers were willing
to pay $25 per month for broadband, but only 12 percent were
willing to pay $40.
One reason for this reluctance to pay for broadband at home
is its availability at work. Adam Thierer, director of telecommunications
studies at the Cato Institute in Washington, D.C., says in the
article, Solving the Broadband Paradox
in Issues in Science and Technology:
If I can get online at work for a
few minutes during the lunch hour each day and order goods from
bandwidth-intensive sites such as Amazon.com, JCrew.com, or
E-Bay, why do I really need an expensive broadband hookup at
home at all? A narrowband dialup connection at home will give
me easy access to e-mail and even allow me to get around most
Web sites without much of a headache. I'll just have to be patient
when I hit the sites with lots of bells and whistles.
Thierer goes on to say that so far, the only broadband killer
apps are Napster-like file sharing and porn. He also points
out that the regulatory environment is drastically different
for broadband providers: telcos are regulated federally as common
carriers (which must carry all traffic equally); cable companies
are regulated locally and, since they are not common carriers,
can cut exclusive and private deals; and satellite and fixed wireless providers
are lightly regulated by the FCC as private carriers.
Theirer argues for a “most favored nation” (MFN) policy for
telecommunications that would state that: “Any communications
carrier seeking to offer a new service or entering a new line
of business should be regulated no more stringently than its
least-regulated competitor.”
That’s part of the intent of the Internet Freedom and Broadband
Deployment Act of 2001 (H.R. 1542) (discussed in a previous SNS). Theirer
says the act, called the Tauzin-Dingell bill, “would allow the
Baby Bell companies, which offer local phone service, to provide
customers with broadband services in the same way that cable
and satellite companies are currently allowed to, free of the
infrastructure-sharing provisions of the Telecom Act of 1996.”
Yeah, if this hotly contested bill ever gets out of committee,
where it has languished since February. But the point of this
bill is valid: the Baby Bells aren’t going to make lots of investments
in new infrastructure to provide broadband if they’ve got to
turn around and offer the infrastructure to competitors. And
that right there is probably the single most important reason
why you’ve seen significant foot-dragging from the Bells on
DSL deployment.
Another bill, the Broadband Internet Access Act (S. 88, H.R.
267) would create tax incentives of 10 to 20 percent to encourage
communications companies to deploy broadband services to rural
communities and “underserved” areas. Don’t hold your breath.
That sucker’s been in committee since early 2001.
The Rural America Technology Enhancement (RATE) Act (H.R. 2847),
which has been in committee all year, would authorize $3 billion
in loans and credits for rural broadband deployment programs
and establish an Office of Rural Technology within the Department
of Agriculture to coordinate technology grants and programs.
There are other legislative efforts, but Theirer argues, and
I agree, that they all would politicize broadband deployment
and get the government in the middle of the whole mess. I have
no faith that this level of government involvement will be a
good thing.
One thing is for sure: As long as the Baby Bells have to share
their infrastructure with all comers and cable and satellite
players do not, there will continue to be a time-consuming and
resource-sucking tug of war in the broadband arena. And home
users that don’t want to double their expenses for Internet
access will be stuck with poky modem access.
Thanks to Alert SNS Reader
Nick Stanley for pointing out Theirer’s article.
Broadband
Content Wars, Part I
Broadband
Content Wars, Part II
Broadband
Content Wars, Part III
Broadband
Content Wars, Part IV
Briefly Noted
- Shameless Self-Promotion Dept.: Check out the article
I wrote for the Taylor Harkins newsletter entitled, Wherever they go, there you are about the wireless service
known as Short Messaging Service (SMS). The article points
out how marketers can use – carefully – this new way to contact
their customers.
I’m featured in Manyworlds’ Thought
Leader Showcase, which lists a few of the white papers
I’ve done.
Finally, the CTOMentor wireless white paper, You Can Take
It with You: Business Applications of Personal Wireless Devices,
is available at ITPapers.
- Nanotech Aping Nature: Nadrian Seeman,
a chemistry professor at New York University said nanotechnology
scientists are investigating the DNA molecule, which is only
2.5 nanometers wide. They’re not particularly interested in
its genetic effects, however, but in the relative ease with
which they can alter it for architectural uses. For example,
researchers are interested in using DNA as scaffolding for
the assembly of 3D computer logic circuits.
Peixuan Guo, a biophysics researcher at Purdue University,
has analyzed a natural nanomotor comprising six RNA molecules.
The motor packs viral DNA into its protein shell, and is one
of the most powerful natural nanomotors yet discovered. It
rotates the biological equivalent of a nut to pull on the
screw-like DNA, pulling it through. This type of device could
be used to target delivery of virus-like medical treatments,
he said. Check out our Nanotechnology
Resources directory for more information on the technology.
UPI
Enterprise
Architecture Resources
I Want These Devices:
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