Eric Nee: Band of Gold - Page 2

By Eric Nee  |  Posted 2004-07-14 Print this article Print

The day when this happens isnt far off. Consider these statistics: First, while the U.S. trails nine other countries in broadband home penetration, it ranks No. 2 when it comes to the percentage of the total population with Internet access. (Sweden is No. 1.) As of April 2004, an estimated 70 percent of the U.S. population, or about 207 million people, used the Internet, according to Nielsen/NetRatings. Three quarters of those Internet users have dial-up connections, not broadband—but are poised for upgrade. In fact, in some parts of the country, broadband is already outpacing narrowband. San Diego tops the list, with 52 percent of subscribers connecting over broadband, followed by Boston at 50 percent and New York City at 49 percent, according to the research firm comScore Networks.

And the migration to broadband is accelerating. In the first three months of 2004, the number of DSL subscribers in the U.S. jumped 13 percent, from 9.4 million to 10.6 million. This acceleration is global. In the same three-month period, 9.5 million new DSL lines were added worldwide—a record-breaking 15 percent increase.

Even if these growth rates slow down after a year or two, its a safe bet that a majority of U.S. homes will have a broadband connection by 2007. And when that happens, broadband will evolve from a niche market to a mass market. And that will change everything.

No industry illustrates the challenges broadband presents better than telecom. Telcos can sell consumers more expensive DSL lines, but they also risk losing some of their lucrative voice revenues as those same consumers switch to Voice over IP—the "killer app" of consumer broadband. Just about every major telecom and cable company has announced plans to offer VoIP, and several are already doing so. The attraction? Not only do consumers like the lower prices, but VoIP also offers telcos other revenue opportunities. Because the calls come in over the Internet, its easy for service providers to layer on additional call management and call tracking features.

More important, VoIP will be the first widely used broadband service that will force consumers to keep their Internet connection always on—and thats the real secret. After all, no one turns off their phone at home, and no one will turn off their Internet connection if they use it for a phone. Once that computer is always on, other businesses can and will find ways to piggyback products and services. Home security companies, for instance, will be able to expand their markets by developing surveillance systems that connect to the Internet. Healthcare companies will be able to provide home healthcare services to the sick and elderly using medical equipment that can be monitored remotely over the Internet.

"The key thing to understand is that always on also means real time," says Paul Saffo, a research director at the Institute for the Future. To date, very few broadband applications take advantage of this, but Saffo predicts they will. Instead of passively watching television, consumers will be able to play along with Who Wants to Be a Millionaire, vote for their favorite entertainer on American Idol, and contribute live video feeds of earthquakes and other breaking news to CNN.

"Its an obvious truism, but we have shifted from an age of mass media as defined by television, to the age of personal media as defined by the Web," says Saffo. "TV delivered the world to our living rooms, but all we could do was watch. The defining quality of the Web is that the audience can talk back."

Some of these ideas might sound like the worst sort of fantasizing that went on during the dot-com era. But the broadband world is real, and becoming more so every day. Companies such as Apple are demonstrating that a business can be built around broadband services. Its time for every business to get just as creative.

Eric Nee, a longtime observer of Silicon Valley, has served in a variety of editorial positions at Forbes, Fortune and Upside magazines. His next column will appear in September.

Illustraion by: John Kascht


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