ZO:Re:BROADBAND ACCESS: I believe this GILDER Editorial in today's WSJ
may PIN POINT TOWRDS A FUNDAMENTAL CHANGE IN BROADBAND IN
AMERICA.
Perhaps I am seeing it simplistically and others can comment.
But what it says, as I understand it is the
-AOL has just clogged up cable broadband by wanting to hog it.
( Initially it wanted open access ).
This will delay deployment of more cable bacause nobody
wants " open access ": neither AOL nor AT&T.
So the whole broadband system will be bogged down in court for months? years?
=======================================================
ALA & NN are sitting as Kings on this landscape
the above AND the FCC decision to allow the RBOCS & smart CLECs to deploy
NEW ATMs/DSL/wireless networks means that the RBOCs are going
to gobble up +60-80% of all new broadband investments.
=======================================================
Let me just point to the last paragraph:
ÿÿÿÿÿÿÿÿ But if the Ninth Circuit upholds Judge Penner's decision
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ or if a state legislature or Congress doesn't get the joke
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ and moves to mandate open access, none of us will be
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ laughing. The capital and talent needed to create truly
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ open access will dry up as investments like the one AOL
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ just made become worth a fraction of their potential
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ value. The irony will be that AOL, which thought it
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ could get away with a simple "never mind," may find
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ itself trying to undo the damage it has done for years to
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ come.
Your thoughts. Anybody else please feel free to comment.
TA
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interactive.wsj.com
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿ Wall Street Journal
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿ February 18, 2000
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ Open Access Now!
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ Wait, Never Mind.
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ By George Gilder, President of Gilder Technology
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ Group and editor of the Gilder Technology Report.
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ America Online has been lobbying for months for laws
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ mandating that cable companies offering broadband
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ service provide "open access" to AOL and other Internet
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ service providers.ÿ But last week AOL borrowed one of
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ the late Gilda Radner's old "Saturday Night Live" punch
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ lines: "Never mind."
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ AOL succeeded in persuading local governments from
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ Portland, Ore., toÿ Broward County, Fla., to mandate open access.
ÿÿÿÿÿÿÿÿÿÿÿÿ ÿÿ Itsÿ rhetoric and that of itsfront group, the OpenNet
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ Coaltion, was lofty. But its motives were self-interested.
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ AOL, which owned no cable systems and had no other
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ broadband channels, feared that its lock on the top slot in
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ the Internet service provider market would disappear
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ and it would find itself out of the game in a matter of
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ months if the consumer broadband competition
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ commenced before AOL could field a team.
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ Today almost 99% of Americans who access the Net
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ from home, including the vast bulk of AOL's customers,
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ do so through analog telephone lines designed to carry
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ tiny rivulets of voice rather than the Amazonian data
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ flows of the Net. Even with a 56K modem -- the fastest
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ available for dialup service -- service is dispiritingly
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ slow and discouraging.
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ Giddy Enthusiasm
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ Transformed by a device called a cable modem, the
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ coaxial cable that feeds TV programming into most
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ homes today can deliver an Internet connection 10 to 100
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ times faster than a 56K modem, at a cost of about $40
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ per month. Users respond with giddy enthusiasm. In less
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ than two years some 1.4 million Americans have signed
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ up for cable Internet access, available to less than 29%
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ of American homes.ÿ AT&T's recent $140 billion cable
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ shopping spree, which made it the largest owner of cable
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ TV franchises in the world, and AOL's $133 billion grab
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ of Time Warner and its cable empire reflected the power
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ and promise of this technology.ÿ
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ All these billions, however, were only the beginning of
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ the necessary investment. Fiber optics can economically
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ carry the necessary bandwidth for high-speed Net access
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ to within a few miles of your home. But because laying
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ fiber to individual households is still prohibitively
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ expensive in most cases, the most pressing problem in
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ high-speed networking today is how to transform
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ existing to-the-home infrastructure, such as your cable
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ connection or your telephone line, into a "last mile"
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ pathway for broadband.
ÿÿÿÿÿÿÿÿÿÿÿÿÿ ÿ Because it can handle so much bandwidth, coaxial TV
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ cable has been the leading candidate. But cable TV
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ connections are essentially one-way paths, while the
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ Internet is a two-way medium. Coaxial cable is also
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ subject to electronic interference, which slows down
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ data transmission. Solving these problems to make cable
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ Internet access a reality for most Americans will require
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ billions in additional investment.
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ Threatening to cut off this infusion of capital -- and thus
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ slow the move from dialup to broadband Internet access
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ -- has been the AOL lobbying and court campaign.
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ AOL's decision to abandon the fight for open access will
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ probably slow legislative efforts in that direction. AOL
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ has reportedly let die two open access bills it was
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ pushing in the legislature of its home state, Virginia.
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ But cable broadband could still face legal suffocation,
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ thanks to federal Judge Owen Panner, who in June
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ upheld the authority of the Portland, Ore., cable
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ regulatory commission to require that AT&T open its
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ privately owned and financed cable lines to competitors,
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ in particular AOL.
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿ Judge Panner's decision, now under review by the Ninth
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ U.S. Circuit Court of Appeals, completely misconceived
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ both the state of the technology and the shape of the
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ broadband market. The decision would force AT&T and
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ others to open their cables to competing ISPs at prices
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ that would severely undercompensate the cable
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ companies for their investment. Result: a windfall for
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ companies that chose to invest in lawyers and lobbyists
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ rather than broadband infrastructure.
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ Even assuming prices proved fair, the usual
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ circumstance for imposing such a "common carrier"
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ requirement is the existence of a "natural monopoly"
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ dictating that only one conduit of a kind can realistically
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ be supported to any consumer. Broadband access is not a
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ natural monopoly. "We don't have a duo-opoly in
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ broadband; we don't even have a monopoly in
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ broadband; we have a no-opoply," says William
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ Kennard, chairman of the Federal Communications
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ Commission.
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ Competing with cable already are digital subscriber
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ lines, which pump through copper telephone wires many
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ times the bandwidth possible just a few years ago. Even
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ mobile wireless will soon be pumping some two
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ megabits per second (more than 35 times as fast as a
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ 56K modem) into mobile phones, Palm Pilots, Rocket
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ Book Readers and other handheld, vest-pocket-nesting,
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ microscreen toting, voice-recognizing Internet
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ appliances.
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿ Judge Panner's decision threatens to take cable out of the
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ broadband race, making the competition far less urgent.
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ DSL technology languished for years until the local
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ phone companies, who are its biggest sponsors, began to
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ lose dialup customers to cable Internet providers such as
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ @Home. DSL matured into a market-ready product
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ almost overnight, and providers slashed prices by as
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ much as half to compete with cable. But the Portland
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ decision eases that pressure considerably.ÿ The share
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ prices of cable modem component manufacturers took a
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ hit, and @Home shares went into a prolonged slide.
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿ Confused perhaps by the presence of established
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ companies like AT&T, Judge Panner seemed to imagine
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ that he was dealing with mature technologies. But
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ broadband is a slender green sprout of a technology, just
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ now finding less than 1% of its eventual market, all too
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ easily trampled under the feet of assorted city elders,
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ congressional beadles and lascivious litigators taking an
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ untimely interest.
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ True open access -- allowing any ISP to send its content
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ over any cable conduit -- is desirable. It is also
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ inevitable if market forces are allowed to reign. When
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ bandwidth is constrained -- as in broadcast TV -- it
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ makes sense for the ogolopolistic owners of the conduits
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ to control the content that flows to the consumer. But
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ when bandwidth is abundant, consumers will
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ overwhelmingly prefer conduits open to everyone's
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ content.
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ AOL was fighting this battle because it sensed its own
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ business model was collapsing. A decade ago, before
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ the World Wide Web, AOL customers signed up for
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ content -- a private network, including e-mail and instant
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ messaging.ÿ But now AOL's proprietary content is
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ insignificant compared to the bounty of the Web, and its
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ prime appeal is attractively priced, user-friendly Net
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ access. But the AOL network is a clunky dialup system
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ whose excruciatingly slow download times can't
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ possibly compete with cable. AOL knew it had to invest
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ massively, as AT&T has, in buying and building
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ broadband conduit -- and it wanted to slow down
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ AT&T's progress while it did.
ÿÿÿÿÿÿÿÿÿÿÿÿÿ Hog the Ball
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ So it used city councils, state legislatures and courts, to
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ hog the ball, pass it around and keep competitors,
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ particularly AT&T and Excite@Home, away from the
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ Net. Then last month AOL made the big deal and
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ acquired Time Warner with its vast cable holdings. ÿ
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ Last week its general counsel, George Vradenburg III,
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ announced that the company now wants the market to
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ decide which cable systems are open to all ISPs and
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ which ones stay proprietary.
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ But if the Ninth Circuit upholds Judge Penner's decision
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ or if a state legislature or Congress doesn't get the joke
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ and moves to mandate open access, none of us will be
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ laughing. The capital and talent needed to create truly
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ open access will dry up as investments like the one AOL
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ just made become worth a fraction of their potential
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ value. The irony will be that AOL, which thought it
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ could get away with a simple "never mind," may find
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ itself trying to undo the damage it has done for years to
ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ come.ÿÿÿ |
