Broadband Boom: Part 1

You know the joke about real estate, that the three key words to know are location, location, and location? Well, at ISPCON this week, the three words are broadband, broadband, and broadband. Internet service providers (the ISPs in this con) are trying to serve a rush of demand.

According to eMarketer, whose numbers represent a consensus of other market researchers, the number of broadband subscribers will more than triple in the next three years, from 9.37 million to 32.03 million.

The bad news is that conventional wisdom insists this won’t be a real competitive market. It will mainly be split between Bellheads and cable head ends.

What really puts the duopolists into dreamland is news that starting early next year, they’ll be able to deliver either DSL or cable modem service without service calls, calls that now cost $500 each. The word is autoconfiguration. This means DSL and cable modems are going to figure out what they need to know by themselves, and consumers will be able to start their own service going, just as with analog modems today.

Conventional wisdom says independent ISPs or competitive local exchange carriers (CLECs), however, won’t get the benefits. Those working in DSL will still need to come out and install a second phone line. Line sharing, which would let them provide service without rolling trucks, is the law but not the practice. The cable guys have it even easier. They’re still fighting open access before the legislatures and courts, and they’re winning. Plus, they have a single standard, profitable at $40 per month for service rated at 400Kbps. Thus, the analysts figure the cable guys will get most of the residential market.

The Bells, however, will win most of the money. They’re going to dominate the business market with a variety of plans at a number of speeds and price points, all delivered by the same set of hardware.

The real struggle, however, will be over the cable guys’ efforts to become gatekeepers not just of access but also of programming, that is, deciding what web sites customers can reach.

Already the cable guys routinely turn off service to customers they suspect of overusing it, as with anyone running Napster. Their coming “interactive TV” efforts will also offer free access to a walled garden of services; sites allowed into the cable box will pay the freight.

The only opportunity for you (and others in the Internet content and commerce space) will be to build services that use the new pipes and that are worth paying for. No one has done this yet. Those who succeed will prosper as no one has before.

The TV networks, over the air and broadcast, expect to win because broadband requires creativity and that’s what they own. Personally, I see game companies jumping in with both feet and the networks becoming reluctant to spend as video start-ups go belly-up trying to turn TV from a passive to an active medium.

Time, as they say, will tell. Tomorrow, I’ll describe where the conventional wisdom is really wrong.