Solving the Broadband Paradox: The Technology Is Ready, but the Market Is Not. Deregulation, Not Subsidies, Will Speed Adoption. (Broadband Policy)

Article excerpt

If The Graduate were being filmed today, the one-word piece of advice that young Benjamin Brad dock would hear is "broadband." Most simply defined as a high-speed communications connection to the home or office, broadband offers Americans the promise of faster Internet access, rapid data downloads, instantaneous video on demand, and a more secure connection to a variety of other cutting-edge technologies and services.

If it were to become ubiquitously available throughout the United States, broadband communications services might finally make possible some long-dreamed-of commercial applications, including telecommuting, video conferencing, telemedicine, and distance learning. Beyond transforming the workplace, broadband could open new opportunities in the home for activities such as electronic banking, online gaming, digital television, music swapping, and faster Web surfing in general.

For these reasons, a growing number of pundits and policymakers are saying that Americans need broadband and they need it now. Moreover, assorted telecom, entertainment, and computer sector leaders are also proclaiming that the future of their industries depends on the rapid spread of broadband access throughout the economy and society. For example, Technology Network (Tech Net), one of the leading tech sector lobbying groups, is asking policymakers to commit to a JFK-esque "man on the moon" promise of guaranteeing 100 megabits per second (Mbps) connections for 100 million U.S. homes and small businesses by the end of this decade. This represents a bold--some would say unrealistic--vision for the future, considering that most Americans today are using a 56K narrowband modem connection and balking at paying the additional fee for a 1.5-Mbps broadband hookup.

What exactly is holding back the expansion of broadband services in America? Is a 100-Mbps vision within 10 years just a quixotic dream? What effect has regulation had on this sector in the past, and what role should public policy play in the future?

A digital white elephant?

As interesting as these questions are, the most important and sometimes forgotten question we should be asking first is: Do consumers really want this stuff? In the minds of many industry analysts, consumer demand for broadband services is simply taken for granted. Many policymakers see an inevitable march toward broadband and want to put themselves at the head of the parade. They have adopted the Field of Dreams philosophy: "If you deploy it, they will subscribe."

But is this really the case? Are Americans clamoring for broadband? Are the benefits really there, and if so, do citizens understand them?

The answers to these questions remain surprisingly elusive for numerous reasons. This market is still in its infancy, and statistical measures are still being developed to accurately gauge potential consumer demand. Thus far, the most-quoted surveys have been conducted by private consulting and financial analysis firms. The cited results are all over the board, and critical evaluation is difficult because the full detailed analysis is available only to those who pay the hefty subscription fees. However, when one looks at government statistics about actual broadband use, it seems clear that the public has not yet caught broadband fever. According to the Federal Communications Commission (FCC), only 7 percent of U.S. homes subscribe to a high-speed access service connection, even though broadband access is available to roughly 75 to 80 percent of U.S. households. A clear paradox seems to exist in the current debate over this issue: Everyone is saying the public demands more broadband, yet the numbers don't yet suggest they really do. What gives?

The FCC's recently issued Third Report on the Availability of High Speed and Advanced Telecommunications Capability concluded that broadband was being made available to Americans in a "reasonable and timely fashion. …