Broadband Baloney

As the growth of the Internet flags, the people who run
struggling on-line media, e-commerce, and networking companies think they have
identified the elixir to revive it: broadband. From Cisco Systems and Intel to
Sony and Yahoo!, they’re all betting that high-speed Internet service will
spur multimedia ads, snazzy video, and the ability to make impulse purchases–thereby
getting more people on the Net to spend more time and more money. Unfortunately,
it’s a bad bet.

Let’s face it, most people simply won’t get high-speed
connections at home for years to come. Blame the steep costs of installing
high-speed lines, clumsy regulatory rules, or the poor economy, but broadband
has been slower to take off than expected. Market watcher Forrester Research
estimates 72% of dial-up Net access customers won’t pay more than $25 a month
for broadband–half of what most providers now charge. As a result, fewer than
5% of US on-line households have anted up. Intel’s executive vice-president,
Leslie Vadasz estimates it could take a decade for two-thirds of households to
get broadband.

That’s just the start of the problem. Too many companies
assume the Net is simply slow television and hope broadband will magically
transform it into a familiar entertainment medium. But that’s a wrongheaded
view of the Net. It’s best at activities that involve interaction, not passive
viewing. "Communication is the past, present, and future of the
Internet," says Eric Schmidt, chairman and chief executive of search engine
Google. That’s why e-mail and instant messaging remain the most popular things
to do on-line. Neither requires broadband, now or ever.

Don’t get me wrong, it’s not that broadband doesn’t
improve use of the Internet. Faster-loading pages are cool, the always-on
connection is even cooler, and speed is crucial for some popular activities such
as downloading music. But crucial enough to overcome all the costs and other
obstacles? Not anytime soon.

Moreover, other bit-hogging activities such as video seem
unlikely to spur many people to pay for broadband at any price. Films on my PC?
Sorry, my office chair at home doesn’t recline far enough. Multimedia ads? No
thanks–they’re just as likely as TV ads to send me to the fridge for a beer,
or more likely to another site. Media companies and advertisers still haven’t
found a way to make money in the narrowband world, how are they going to make
money with broadband?

Even if some people might want to watch this stuff on their
PC, or the PC somehow finds its way into the living room, the broadband
connections available today aren’t nearly broad enough for video and the like.
On a dial-up line, you get grainy, jerky video in a tiny window. On a DSL or
cable modem connection, you get grainy, jerky video in a larger window.
Technology to compress data helps, but TV-quality video on a big screen may
require the same optical fiber used in commercial high-speed lines to be
installed all the way to each home. By most accounts, the cost of doing that is
so high it’s at least 15 years away.

The thing is, tech companies and websites already have plenty
of ways to improve the Internet experience at their fingertips. Why on earth don’t
we have instant-on PCs yet? How about installing more servers at sluggish
websites? The main reason many Web pages load slowly, points out Microsoft’s
senior researcher Jim Gray, is that servers are under-powered, not that Net
connections are too slow. And when are PC and network gear makers finally going
to create seamless links between computers and entertainment equipment? The
sooner the techies quit chasing broadband pipe dreams and work on these basics,
the sooner we’ll get jazzed again about the Internet.

By Robert D
Hof in BusinessWeek. Copyright 2001 by The McGraw-Hill Companies, Inc