June 25, 2001
Tech Industry Seeks Its Salvation
In High-Speed Internet Connections
By SCOTT THURM and GLENN R. SIMPSON
Staff Reporters of THE WALL STREET JOURNAL
High-tech executives think they've found a cure for the industry's deepest
slump in a decade: High-speed Internet access for everyone.
For years, telephone and cable-TV companies
have been promising to build high-speed
"broadband" networks, which let consumers
and small businesses tap the Internet 20 or 30
times faster than conventional phone lines, yet
the rollout has been slow. There's little
agreement, even within the tech world, on the
ground rules for building such networks, which
would cost tens of billions of dollars. But
suddenly the topic has rocketed to the top of the technology industry's
agenda in Washington, where traditionally distant tech executives are
asking for help.
The chairmen of International Business Machines Corp., Intel Corp.,
Motorola Inc. and others last week met with key lawmakers and National
Economic Council officials to support bills that would provide tax credits
for building high-speed networks in rural areas and economically
depressed inner cities. Other executives propose broader tax breaks,
comparing broadband Internet links with the government-financed
interstate highway or rural electric systems.
Likening the task to the 1960s effort to put a man on the moon, John
Chambers, chief executive of Cisco Systems Inc., is asking that the federal
government commit to making broadband connections available to every
home by 2010. A Cisco lobbyist calls the effort "our No. 1 goal" (although
a spokesman says Mr. Chambers doesn't think the government would be
the one to build the network).
Some tech executives argue that extending broadband networks would
help revive the national economy, because tech spending contributed such
a large share of economic growth in recent years. "The stimulation would
go well beyond hardware and software providers," says Phil Bond,
Hewlett-Packard Co.'s top Washington lobbyist.
But some analysts are struck by
the sudden change in an industry
that previously distanced itself from
Washington. Technology
companies "are going to
Washington looking for a bailout,"
says Scott Cleland, chief executive
of the Precursor Group, a
Washington-based independent
research company. "That tells you
their situations are awfully bad
because when times were good
they were telling the government to
stay away."
Monday, more than 40 tech
executives are set to meet at H-P's Palo Alto, Calif., headquarters to rally
behind the broadband effort and discuss possible policy initiatives. Other
tech groups have similar efforts under way. Last week's lobbying was
orchestrated by the Computer Systems Policy Project, which represents
big computer companies. "The administration is listening carefully to all
segments of industry and working with lawmakers and regulators to assess
policy alternatives to accelerate broadband deployment," a White House
spokesman says.
The renewed push for broadband stems from widespread disappointment
with the Telecommunications Act of 1996, which was supposed to
encourage competition, particularly for local phone service. But many of
the upstarts that challenged the Baby Bells couldn't make profits and got
hurt in the collapse of the high-tech bubble. And companies that built data
networks to carry an expected flood of Internet traffic are starving for
business.
Tech executives fear that broadband deployment will slow even further. A
year ago, the pace was a secondary concern for big tech companies. Then
the dot-com bubble burst. Companies cut their purchases of tech gear, and
executives of tech companies faced declining sales, losses and layoffs.
Now, potential sales resulting from a new wave of high-speed Internet
connections look like a port in a storm.
When Mr. Chambers broached the subject before 50 executives at a
February meeting of TechNet, an industry lobbying group, 20 hands shot
up, according to a person who was in the room. TechNet quickly
assembled a "working group" on broadband policy, including Mr.
Chambers and executives from Intel, Microsoft Corp., 3Com Corp. and
ExciteAtHome Corp. Its recommendations are expected in September.
Executives hope ubiquitous high-speed links can ignite another "virtuous
cycle" of innovation and spending on tech gear, like the one that
accompanied the first phase of the Internet in the late 1990s. Telecom-gear
makers would sell equipment to build the networks. PC- and chip-makers
would sell consumers new computers to keep up with faster connections.
Software makers and content creators would update programs. "We're
convinced now more than ever that broadband is crucial to our industry,"
says Peter Pitsch, an attorney in Intel's Washington office.
A unified tech industry could be influential in the national debate. "I've
always felt the computer folks would tip the balance if they ever came into
the thing in a serious way," says Jeffrey Eisenach, president of the nonprofit
Progress and Freedom Foundation, a group backed by the Bell phone
companies that is sponsoring the meeting at H-P.
But there's little agreement in the industry about how to get the job done.
The differences are apparent on the central telecommunications question
facing Congress this year: whether to relax 1996 rules limiting the role of
Bells in building and operating data networks. Until recently, big tech
companies were reluctant to take sides because they had customers in rival
camps. Now, their reluctance may be fading.
In a speech last week, Intel Chairman Andrew Grove endorsed loosening
some of the restrictions. That was a bit of a shift for the chip giant, which
had invested in several Baby Bell challengers in the heady days after the
1996 law was passed.
"If we want to see broadband, we have to follow the money, as cruel and
unfair as it sounds," said Mr. Grove, who lunched with Ivan Seidenberg,
chief executive of Baby Bell Verizon Communications Inc., the following
day. Mr. Grove called for "a new approach" in which the Bells "should be
allowed to invest with the fair expectation of making a lot of money."
Others blame the Bells for stifling competition, then dragging their feet. "I'm
afraid if we leave it to existing incumbents, the speed at which broadband
will progress would not be satisfactory," says 3Com Chairman Eric
Benhamou. He suggests government-subsidized loans, or tax rebates for
signing up broadband customers. Most tech lobbyists, though, consider it
politically toxic to mention those ideas.
Write to Scott Thurm at scott.thurm@wsj.com and Glenn R. Simpson at
glenn.simpson@wsj.com |
