Will broadband technology deliver?
By Ron Chepesiuk
Since the late 1990s, technology analysts have predicted that broadband Internet connections – high-speed, high-capacity transmission channels carried on fiber-optic cables that have a wider bandwidth than conventional telephone lines – would soon become commonplace. The fast cables carry video, voice and data simultaneously.
The thinking has been that broadband connections, such as cable modems and DSL subscriber lines, will proliferate. This, in turn, will spark a revolution that transforms the entertainment experience of consumers, creating both opportunities and challenges for e-businesses. Moreover, it was believed many key technologies — video conferencing, application outsourcing and server-based computing — would reach their full potential through broadband.
“There’s been a lot of talk about how broadband will lead to a ‘revolution’ and this has led to a lot of hype,” said David Carroll, CFO and COO of BestEdeal, a price comparison Web site. “There has been some disappointment that broadband hasn’t arrived yet.”
Indeed, in recent months broadband technology has come under fire from many industry analysts. The road leading to the broadband revolution has become a big mess, they say. Technical glitches abound. The infrastructure is weak. Customer service is lousy.
As Keith Regan, an e-commerce columnist put it: “Broadband is here and already there are signs that the savior we held our breath for isn’t going to transform the Web into Nirvana overnight. In fact, the broadband revolution could very well end with a whimper.”
What to Expect
Has the broadband story been mostly hype? “Nonsense,” said Bruce Kasrel, senior research analyst at the Cambridge, Mass.-based Forrester Research, a think tank that analyzes technology change.
“The [broadband] industry is moving along at a pretty good clip,” he explained. “Sure, cable modem and DSL had shortages last year, but those problems were worked out. The industry, in fact, is on track to sign up ten to 11 million subscribers in the United States by the end of the year. That’s going to double the number of broadband connections.”
Emarketer, an Internet consulting company, backs the Forrester prediction of robust growth for the broadband industry. While there are currently around 5.43 million subscribers to high-speed broadband Internet services, that number will mushroom to 32 million by 2003, a six-fold increase. Business broadband users in the United States will expand to 11.3 million by 2003.
Asian American businesses contacted by AsianWeek agree that broadband has a promising future.
“I’m a big believer in the technology and I’m very bullish on its future,” said Matt Sridhar, vice president of marketing and development at the San Jose-based 911 Inc., a leading developer of Web-based integrated knowledge service solutions. “I believe that in the long-term, the problems facing the technology will work themselves out.”
Ron Victor, CEO of Homeland Networks Corporation, a San Jose company that streams media to Asians worldwide, compares the current state of broadband development to the time when the video cassette came out. “The movie industry thought it was going to be put out of business, but the opposite thing happened,” Victor explained. “It actually enhanced the movie business by providing one more outlet for content. Broadband will eventually have the same impact.”
Click2Asia, a prominent media company that targets Asian and Asian American populations, also uses broadband to help the company stream content over the Web.
“Broadband does the job for the most part,” said Pierre Wuu, Click2Asia’s chief operating officer. “Speeds can vary depending on the time of day. You can have the fastest pipe, but it doesn’t mean a thing if servers are jammed. But that’s a hardware issue, not a broadband issue.”
The Asian Scene
Asian American businesses with interests in Asia are more optimistic about recent developments, with forecasts showing that broadband is ready to take off in Asia. Last spring, the British consulting group COMYS predicted that by 2010, 14 million SMEs (small- and medium-size enterprises) in the United States will be using broadband. However, that figure will be outstripped by demand in Asia through a combination of several factors, including greater dependence on high-speed networks, growth of market size and increased economic growth.
Developing Asian countries, especially China, are expected to become big players in the broadband trend.
“Content such as Internet transactions and video-on-demand are already driving broadband at an exponential rate in some developing countries [in Asia],” Edmund Wei, president and CEO of CommVerge Solution Ltd., told the Malaysian New Times Press this month.
China entered the broadband market last December when Shanghai Telcom, the country’s largest Internet service provider, introduced phone line technology for increasing the speed of Internet transmissions. Two days later, Shanghai Cable Network Company Ltd., which calls itself the world’s largest single provider of one-way cable access, launched the world’s largest interactive cable network. The companies hope to tap the Shanghai market of more than 1.8 million Internet users.
These developments are important for Internet development in China, said Gregory P. Ray, CEO of Shanghai-based MIQ solutions, but he pointed out, “Broadband and all aspects of fast Internet service are still in their infancy in China. It’s extremely difficult and costly to get a fast Internet connection. According to most research reports I’ve read, connection speed is the number one complaint of Internet users in China.”
Nokia, the leading supplier of mobile phones and Internet telecom networks, forged a strategic alliance last January with China.com to tap China’s broadband network market. Many experts see developments like this as a possible solution to the slowing development of China’s e-commerce due to the bandwidth problems.
But, Ray said: “I wouldn’t say that broadband is the key, exclusive success factor for e-commerce [in China]. Many more fundamental issues are holding back e-commerce here, beginning with non-tradable currencies and a lack of credit cards.”
Ray sees several obstacles to making broadband technology truly viable in China. “One reason is the argument between the Chinese Telecom Ministry and the cable providers, and another is China’s fear of freedom of the press. Furthermore, Beijing is fearful of accidentally giving away the revenue-making power of the telecom industry to foreign participants.”
Costly in America
Broadband in the United States also faces obstacles. For one thing, it’s still expensive, and those who have the technology tend to be well off. Forrester reports that the medium salary of broadband users in the United States is $56,300, whereas the average salary of dial-up users is $34,200.
Joe Butt, an analyst with Forrester Research, said that the price of broadband in the United States is in the $40 per month range, but the price should be in the $20 range. “That’s definitely a prerequisite if the rosy projections for broadband users are to become a reality,” he explained. “But it will happen.”
It can also be expensive for businesses to deploy broadband.
“If Click2Asia doubled its user base, then to meet that demand, we would be talking about a one-time, up-front cost of $150,000 to $200,000 for the hardware and an additional monthly cost of $10,000 to $15,000,” Wuu explained. “But we would need to do it if our customers started to get DSL modems in large numbers because our servers would be strained.”
Competition Is Key
Competition is essential to keep costs down, broadband industry watchers agree. While there have been rumblings about the danger of monopolies in the broadband industry, vigorous competition for high-speed Internet access is increasing, according to Audòie Krause, executive secretary for NetAction, a San Francisco-based consumer advocacy group. “Nearly everyday, there are reports about deals being made to offer high-speed access via cable, DSL, satellite or wireless technology,” she said.
Krause used California as an example. When Redwood City-based AtHome introduced its high-speed cable modem service for $39.95 recently, GTE and Pacific Bell were forced to drop the price of their high-speed DSL service from $89.95 to $39.95.
Dropping prices may speed the growth of broadband, but its development is also being slowed by the fact that industry service providers aren’t making any money yet. BusinessWeek reported last month that in the first three quarters of 2000, the national providers of DSL service — Rhythms, NetConnections and Covad Communications Group — lost a combined $1.15 billion on sales of $279 million.
Growing Pains
What about all those consumer horror stories about broadband service? Forrester’s Kasrel acknowledges that customer service is a problem, but says, “Again, it’s all a part of the growing pains stage of an emerging industry, where it’s normal to have too much demand and not enough supply. Remember the early days of the Internet, when it was mushrooming in popularity? The Web servers couldn’t handle the traffic, but eventually they did. Similarly, the broadband industry will come around.”
“No company has really delivered a well-thought-out broadband experience,” explained David Yee, a software engineer for California Internet Group, which is working hard to leverage broadband technology to provide a portal experience similar to Yahoo. “A site might have a few video clips here and there, but the Internet is still structured for static pages for low bandwidth users,” he said.
However, many predict that will change. According to Forrester, by 2003 PCs will compose only about half of all broadband devices, while TV and game consoles will dominate the other half.
“Personal rich media will take off,” Kasrel said, “because broadband is going to make it easier to create, share and communicate personal content.”
Ron Chepesiuk is a Rock Hill, SC journalist. He can be reached by e-mail at 100423.2656@compuserve.com. |
