FCC group blames regulations, cost for broadband lag

WASHINGTON — A group of technology executives and academics meeting at the U.S. Federal Communications Commission (FCC) blamed a variety of factors for a slow rate of broadband adoption in the U.S., including the cost of laying new fiber, regulations forcing competition for DSL and the lack of packaged applications and content.

A meeting of the FCC’s Technological Advisory Council (TAC) Thursday examined the reasons why U.S. broadband adoption is lagging, compared to several other countries, with several in the group promoting competing technologies, including wireless broadband and soon-to-be-launched power line-based broadband services.

The group of about 20 technology executives and academics also had competing views as to why less than 18 percent of U.S. residents have broadband Internet service, according to a February survey by the University of Colorado. SriramViswanathan, director of strategic investments for Intel Capital, suggested that a lack of “vertical applications,” including e-learning or telemedicine packages, may be holding back consumer interest in broadband. He urged the executives gathered at the meeting to think of ways to package such applications and market them to consumers.

He demonstrated a program that turns doctors’ magnetic resonance imaging (MRI) scans into 3D images of complete sections of a human body, showing detailed defects. But others at the meeting questioned why normal consumers, who might use such a service once or twice in a lifetime, would see it as a reason to buy broadband.

“If I said the next-generation health diagnostic … is going to be much richer than the current model, the fact that they can do this, whether they use it once in a lifetime or 10 times in a month, is almost irrelevant,” Viswanathan answered. “The fact that they can access it enables them to see the value and be willing to pay for it.”

TAC chairman Robert Lucky, corporate vice president of applied research at Telcordia Technologies, questioned if telemedicine or other packages suggested by Viswanathan were really the killer applications for broadband. He spoke recently at the Georgia Institute of Technology and found that the overwhelming demand for broadband there was for downloading free music.

“I feel there’s a certain amount of hypocrisy in some of the calculations people make,” Lucky said. “If all of that content is cut off, as a lot of the industry is trying to do, what is broadband left with?”

Just 17.6 percent of those surveyed in February had high-speed Internet connections, while 44 percent had dial-up access, said Scott Savage, a professor of interdisciplinary telecommunications at the University of Colorado. Broadband penetration in the U.S. will be behind eight other countries, including South Korea, Canada and Sweden, by 2005, although it was fourth in 2001, according to Forrester Research estimates.

Of the 575 U.S. residents surveyed, 68 percent had cable broadband access and 30 percent had DSL (digital subscriber line), while DSL is the dominant broadband choice in most of the rest of the world, Savage noted. About 17 percent of those surveyed had dial-up but were willing to pay $32 to $42 more a month for broadband if it were more reliable, he said.

Craig Mundie, chief technical officer of advanced strategies and policy at Microsoft, defended the U.S. music industry, saying it would likely offer more “legitimate” music downloading services soon. Mundie laid some of the blame for the lagging U.S. adoption at the feet of the FCC and its policies forcing the large regional Bell companies to share pieces of their networks with competitors.

“Businesses are usually the ones who essentially arrange the capital to make the investment,” Mundie said. “You could say the uncertainty over whether they will have a return is the thing that’s leading them to question whether to make the investment. That comes back to the FCC; in the case of the telephone people, they’ve argued for some time they’re reticent to make that investment … because of the wholesaling of the physical plant.”

The survey’s numbers don’t give Internet service providers much incentive to build new networks or improve existing ones, said Nick Frigo, division manager at the Broadband Access Department for AT&T Labs. He showed attendees a business plan scenario for laying high-speed fiber lines into residential areas, and found a small intersection where price and demand came together to create a profitable business. In his scenario, at least 50 percent of homes in an area would have to buy a fiber-based service and pay $112 a month.

Competition in the fiber marketplace makes the business case that much tougher, he noted. “Really, fiber to the home looks like a monopoly, technically and economically,” Frigo said. “Really, the reason it hasn’t actually gotten started is we can’t ever think of a sensible business case except in niche markets and a monopoly situation.”

But Phil Hunt, chairman and chief executive officer of Amperion, said his company sees a business case in providing broadband access through existing power lines. Hunt’s company makes the equipment that allows Internet service providers to hook up Wi-Fi wireless transmitters to power lines, and he said the company’s partners will be rolling out service by this summer.

PowerWiFi, as Hunt calls it, can deliver data at speeds up to 20 megabits per second, which won’t compete with future versions of cable and DSL, but he trumpeted the service as a good alternative today, especially in rural areas ignored by other broadband providers. An Internet service provider using wireless transmitters that attach to power lines could bring broadband access to a city of 10,000 in one day, he said, and transmitters spaced on power lines along a main road could provide wireless access for cars.

“It’s inexpensive to deploy, and it is very rapid to deploy,” Hunt said of PowerWiFi.

Ed Thomas, chief of the FCC Office of Engineering and Technology, said PowerWiFi has potential, but he questioned how it would expand the number of broadband customers in the U.S., when about 95 percent of U.S. homes already have access to either cable or DSL service. “Starting out late, and with roughly the same underlying cost, how do you crack into that marketplace?” Thomas asked.

Hunt answered that utility companies with money to spend see power line communications as a way to provide more services to existing customers and add money to their bottom lines.

While Hunt promoted the future of wireless broadband, John Ryan, principal and chief analyst for RHK, questioned the FCC’s decision to allow large chunks of the radio spectrum to be unlicensed, and used by such devices as Wi-Fi transmitters. Internet service providers delivering unlicensed wireless services have no guarantees against poachers, he argued.

“The most serious problem is how do you build a business model when, as soon as you’ve developed it, somebody else has the right to come in and take it away,” Ryan said. “It does mean the possibility of constraining the rate at which broadband gets delivered to homes, because nobody can actually own the business.”

But others at the meeting disagreed, saying unlicensed wireless spectrum allows users to share bandwidth, a kind of community benefit. “If I put in 802.11 and you can use mine when you walk by my house, and I can use yours, that is a business model,” said Nicholas Negroponte, chairman of the Massachusetts Institute of Technology Media Laboratory. “It’s the kind that doesn’t necessarily make a company, but it is an epidemic.”

The FCC uses the Technological Advisory Council as a kind of “headlights” for where the agency should look into technology issues, Thomas said.