Broadband's Faded Promise

"What this country needs is a really good five-cent cigar." --Thomas Riley Marshall, Vice President of the United States, 1913-1921

To paraphrase and adjust the math: what this country needs is a really good $500 billion technology--something to reignite popular enthusiasm and the economy. Once upon a time, "broadband" communication into America's homes was supposed to do the trick. We'd all have high-speed Internet connections that would weave through our kitchens, living rooms, studies and bathrooms. A host of Internet "appliances" would order groceries, deliver movies and even examine our bodily wastes (through "smart toilets") for developing diseases. It hasn't quite worked out.

Enron's bankruptcy is now the big business story; it's rich in human drama and squandered fortunes. But another bankruptcy--that of Excite@Home--better reflects the economy's wider distress. Excite@Home aimed to become a leading supplier of broadband services to cable-TV companies; now it's fighting with creditors and customers before a bankruptcy judge. In one dispute, Excite@ Home cut off service to 850,000 AT&T Internet users. The bankruptcy symbolizes broadband's unfulfilled promise.

Let's be clear: it isn't dead. About 10 percent of U.S. homes get broadband, up from virtually none in 1998. Historically, this rate of adoption compares favorably with other new consumer-electronics products. Getting to 10 percent household penetration took 12 years for color TVs, 8 years for cell phones and 4.5 years for CD players, according to figures compiled by the Federal Communications Commission. But broadband hasn't lived up to the hype.

In 1996 one well-known consulting firm predicted that broadband would be in 14 million homes by the end of 2000; the actual figure was half that. Even now, broadband is seen as a potential economic savior. "The tenor in this town [Washington] is that, after the dot-com fizzle, broadband is the only thing that can save us [economically and technically]," says Lee Rainie, director of the Pew Internet & American Life Project. Rainie is correctly skeptical.

All new technologies face technical hurdles, high costs and uncertainty about their value. Broadband couldn't even get into homes without sizable new business investments. From 1998 through 2001, the 10 largest cable companies spent $46 billion upgrading their systems, estimates Michael Goodman of the Yankee Group; a large part of that converted one-way TV systems into two-way broadband. Phone companies had to upgrade copper lines--meant for voice--to DSL (digital subscriber lines). By Goodman's estimate, about 75 percent of U.S. homes can receive either cable-modem or DSL service. But just because it's available doesn't mean you can get it easily.

Consider our household. My wife decided we needed DSL. (I dissented, but then again, if everyone had my wants, the economy would be stuck in the 1870s.) Our 15-year-old son was assigned the job of installing the modem and software. Which he did. It didn't work. After several hours on the phone with Verizon's reps, it still didn't work (even though he'd done everything correctly). My wife knows someone who'd installed DSL for Verizon. It took him 90 minutes and many phone calls to complete the hookup. A neighbor had a similar experience. After four hours he still didn't have DSL. "It seemed easy and would have been easy--if it had worked," he said.

My son was told it could cost $500 for a company installer to come to our home. By contrast, Verizon says that 98 percent of its DSL customers routinely self-install. Who knows, maybe we just had a bad experience.

The larger problem is that once you've got it, broadband isn't much use. Downloading is quicker, but most of those fabulous multimedia services and new Internet appliances essentially don't exist. Color TV faced the same dilemma in the 1960s. The networks wouldn't produce color programs until people had color sets, and people wouldn't buy color sets unless they could watch color programs. "There are a lot of people who put it [broadband] in and discover they don't spend that much time on the Internet," says Bob Larribeau of RHK, Inc., a market-research firm.

True enough. Average Internet users spend about 85 minutes on-line a day, according to Pew's latest survey. Some of that is at work, some at home. Most presumably involves e-mail, where broadband delivers no real advantage. And it's dwarfed by TV watching, which exceeds four hours a day for typical households. So some broadband customers discontinue their service, because it's costly--about $50 a month for DSL, $45 for cable modem.

Excite@Home's bankruptcy reflects mismanagement and the fact that demand didn't grow fast enough to compensate for mistakes. Market forecasts are now more restrained; Gartner Dataquest, a research firm, projects that about 25 to 30 percent of homes may have broadband by 2004. Someday it will become more widespread, even universal. And someday there will be a bandwagon effect, when more customers inspire more services, improved technology and lower prices--and vice versa.

But for now it won't salvage the economy. All the hype recalls what the humorist Will Rogers once said of cigars: "Our country has plenty of good five-cent cigars, but the trouble is they charge 15 cents for them." Same problem, different product.

Corrections: In my column "Requiem for the Jet Age?" (Nov. 26) I made several errors. The column stated: "From 1977 to 2000 there were 108 [airline] deaths. In the same period, highway fatalities totaled 166,916." I mistyped; the actual time period was 1997 to 2000. And relying on a Boeing spokesman, I reported that all its planes after the Boeing 737 in 1968 had two-person cockpit crews. In fact, the 747--introduced in 1970--originally had a three-person cockpit crew. The cockpit was later redesigned for two.