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 TEST CENTER Broadband By Tom Yager June 20, 2002 IF ALL HAD gone according to the optimists' plans, the cheap broadband enjoyed by consumers -- almost unlimited bandwidth at practically dial-up rates -- would quickly have found its way into business. If a residence could get 6Mbps cable service or an 8Mbps DSL line for less than $100 a month, then the days of the $1,500-per-month, 1.5Mbps T1 line had to be numbered.
Still spending money The faltering economy has reshaped CTOs' spending priorities, but bandwidth remains a necessary expense. Despite the high cost of business broadband, IT leaders aren't scrimping -- 97 percent of respondents have high-speed Internet access at their headquarters -- and they are planning to extend broadband out into regional offices and to remote workers. Although just 59 percent of respondents report currently deploying broadband to regional offices, 67 percent expect those employees to have broadband by this time next year. And that number only increases for telecommuters: 59 percent of respondents' remote workers will have broadband in the next 12 months, whereas just 39 percent have broadband now. Mainstream broadband is often considered a consumer technology, but DSL and cable modem circuits are seeing far more business use among survey respondents. Although most business DSL and cable installations are not at headquarters, companies often foot the bill for employees' high-speed data lines. At the same time, small to midsize businesses rely more on DSL and cable as their primary connection to the Internet. A nationwide fiber-optic broadband network never materialized, limiting the widespread adoption of broadband. Poor planning, overbuilding, high prices, and impatient investors pushed the most promising fiber-optic telecommunications start-ups under. IT leaders report a respectable interest in fiber-optic networking, but the majority of them are spending far more on LAN technology than on broadband; only 33 of 577 polled readers plan to include wide-area fiber-optic networking in their broadband strategies. But broadband is being deployed, and according to survey respondents, the top reason is Web services. XML's verbosity, which makes it seem like a natural bandwidth hog that demands additional network capacity, is cited as an impediment to Web services' widespread use. Text files, especially XML with its repetitive nature, respond beautifully to compression. But encrypted data and embedded binaries (such as graphics and video) often ride along with XML streams, confounding compression algorithms and increasing bandwidth requirements. Bigger pie, fewer slices There is a lot of broadband spending, but it's flowing to a shrinking list of successful players. It seems as if there will be no room for the little guy, as market leaders continue to outdistance their nearest competitors by huge margins. Cisco, for instance, dominates the network equipment market: 59 percent of respondents use Cisco routers, and 44 percent plan to buy them in the next year; 61 percent use or plan to use in the next 12 months Cisco optical networking devices. Distant runners-up 3Com, Alcatel, Lucent, and Nortel are fighting over a shrinking share of Cisco's leftovers. Most companies buying DSL are getting it from SBC, Verizon, Qwest, and BellSouth. Covad is the only nontelco making a dent in the DSL market, but the survey shows that it serves about half as many businesses as does SBC. The long-term survivors in the broadband race will be financially stable operators that own their infrastructures. Regional telcos and nationwide cable companies will dominate. In business use of cable, 67 percent of respondents use or plan to use in the next year AT&T Broadband, and 50 percent use or plan to use AOL Time Warner's service. The same deregulation that will spur investment will allow telcos to kick the few remaining competitors off their circuits. As choices evaporate, prices will rise, but even that's a double-edged sword. Telcos won't build up their infrastructure or expand their service offerings unless it's profitable. The government can't decide for them how much profit is enough. And although Republicans and Democrats alike think that widespread adoption of broadband is necessary to stimulate economic growth and ensure national security, both parties seem determined to debate the legislative nuances of the methods to achieve these goals at least through this year. In the meantime, although they remain far too expensive, T1 and T3 lines are still the most reliable path to high-speed data services. If you buy DSL, get it from your telco and get the highest class of service offered. If you can lock in current rates for a year or more, sign up. The cost of business DSL will skyrocket after deregulation, then fall again after the recovery and as cable and wireless operators get fresh capital to push into DSL's markets. Overall, expect prices and services to fluctuate dramatically during the next couple of years. Cable should become an increasingly attractive option for businesses, as large operators saturate residential markets and go looking for new revenue. Cable is easier to install than DSL, and in many key metro areas, it is extremely reliable. If your operator offers business service, test cable as a simple, inexpensive way to move noncritical inbound traffic off of your expensive data circuits. If you want fiber-optic networking, you can wait for the dark fiber to light up again after the recovery or move into a big, new downtown office building. Providers are running fiber-optic cabling to high-density commercial spaces and are channeling the bandwidth through Ethernet taps in each office. You can buy as much bandwidth as you need with almost no investment in communications equipment or specialized staff. Rooftop radio antennas and building-to-building laser beams shuttle data around metropolitan districts that fiber-optic cabling doesn't reach, again using Ethernet within the building. From now on, providers will be guided by a sound business principle not in practice during the boom: Target the highest concentrations of likely subscribers with service that brings in more money than it costs. Business broadband will follow residential trends because homes grossly outnumber businesses -- broadband will flourish in cities and affluent suburbs, with carrier choice and service availability falling off sharply in less populated areas. It will take more than two years for most unused fiber-optic circuits to light up. Wireless bears watching, especially as the Federal Communications Commission opens up more spectrum to carriers. But copper and mixed-mode circuits -- T1, T3, DSL, and cable -- will dominate for the next couple of years. Return to our Test Center Research Report: Broadband   
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