Competition Seen As Key To Broadband RollOut
Business customers have a variety of options for high-speed Internet access, and for the carriers, customized business services such as dedicated lines, virtual private networks and Web hosting generate greater margins than do the typical services offered residential customers.
While high-speed broadband access for businesses is generally available — for a price —- one industry analyst thinks it’s time to turn the attention to the residential consumer whose access is severely limited by comparison.
That’s the thinking of Robert Saunders, senior analyst with the Eastern Management Group. The New Jersey-based company is one of the nation’s largest management-consulting firms serving carriers, manufacturers and software companies worldwide.
He said there’s movement afoot on Capitol Hill to do just that.
Saunders said legislators are considering some broadband bills that would give a subsidy to carriers that deploy high-speed access to the more rural areas where there may not be either the high demand or the return on investment that carriers see in the dense metro areas.
One bill, the Internet Freedom and Broadband Deployment Act (H.R. 1542), sponsored by Rep. Billy Tauzin (R-La.), chairman of the House Energy and Commerce Committee, and Rep. John Dingell (D-Mich.), seeks to promote high-speed Internet access across the board by encouraging the Bells — Verizon, Qwest and Ameritech (SBC) — to roll out broadband.
The purpose of the Tauzin-Dingell bill is to level the playing field among cable providers, telecom carriers, satellite companies and wireless providers so high-speed access is widely available to everyone.
Currently it’s not widely available.
According to the Michigan Economic Development Corporation (MEDC), at year-end 2000 only one fiberoptic network served the Grand Rapids-Muskegon-Holland metropolitan statistical area. This spring, the MEDC launched an initiative dubbed LinkMichigan, which focuses on building and maintaining a high-speed backbone infrastructure throughout the state and increasing access to high-speed services.
Saunders stressed that getting other competitors involved is the best way to achieve faster broadband roll out — as well as to reduce prices and raise service quality.
Saunders said the Bell companies have been inhibited from building and rolling out new fiber-based networks because they’re afraid they’d spend huge amounts of money only to have competitors jump on their networks. That way, those competitors would be able to reap the profits simply by piggybacking off the network’s investment.
The emphasis is on structuring regulation so there are benefits rather than punishments for getting involved in a market, he said.
“You have to be able to envision a return on that investment before you begin tearing up the street, laying fiber down and connecting up customers,” he noted. “If that’s not there, why go through the process?”
That’s one of the issues Congress is wrestling over now, and it’s one of the issues keeping broadband deployment at the residential level stagnant in some areas, he added.
Nationwide, cable companies currently have about a 70 percent market share. But the cable companies own their networks. If they put cable in, they own the rights to it, Saunders explained, whereas on the telecom side it’s a little different because of thick accumulations of regulations over the decades.
The Bells have a healthy domination in the DSL market, which is a much smaller part of the overall broadband market. Then there are the fewer number of competitors that offer either fixed wireless or broadband satellite.
“The real key technology that the phone companies and utility companies are going to be involved in in the future is going to be fiber: fiber-to-the-curb connections and eventually fiber to the home connections,” he said.
In residential markets, whoever gets to the home first is probably going to be the one to get the business, he observed. And the more competition there is, the faster that will happen.
According to the Eastern Management Group, 11 percent of Michigan households currently have broadband connections. In Detroit, 19.7 percent of households have broadband connections, ranking the city 10th in the nation for broadband penetration.
By comparison, Chicago has 16 percent penetration and Columbus, Ohio, 21.8 percent.
If the phone, cable, fixed wireless, satellite companies are all competing players in a space, Saunders said that competition will naturally force prices down and quality up because people can shop around.
“That’s really the key,” Saunders added.
“Congress and a lot of state legislators have recognized that they have to kind of balance the playing field so other players can come in and no one segment or one company can dominate the market.
“If the satellite companies, or fixed wireless companies or companies offering DSL begin to knock on the cable companies’ door and there’s that hint of fear there, then you’ll start to see the speed of broadband deployment and it will probably increase at a pretty fast clip,” Saunders predicted.