n a recent
NRO Financial Symposium on the technology sector, a number of
industry experts stressed the need for increased telecommuting as
result of the September 11 attacks. Larry Buchsbaum of The Yankee
Group said "The ability to get people to fly is going to be severely
hampered for a long time," which makes telecommuting and the ability
of businesses to disperse their people and operations "strong alternatives
to business as usual."
will also be hampered for some time by two critical issues: a nationwide
lack of broadband access, and the bottleneck of the current maximum
speed of that broadband. The events of September 11 make the need
to reduce or eliminate both of those problems even more critical.
director of telecommunications studies at the Cato Institute, says
that this crisis "screams out for the need of some sort deregulation
to take place sooner rather than later, precisely because the current
regulatory status quo is not getting us where we need to go, as
quickly as all of us hoped. And that problem is not being remedied
by keeping the current rules in place, or making them stronger,
or increasing penalties or fines, or regulatory burdens, as some
policy makers have suggested.
opposite would be the better way to go," Thierer continues, "freeing
up broadband from its many requirements, and allowing companies
to deploy however they wish. Unfortunately, however, the opponents
of deregulation outweigh and outnumber the proponents of deregulation
at this time."
host of www.techcentralstation.com, believes that the ideal solution
would be to finish the job of the 1984 break-up of AT&T's monopoly,
and to "take the last monopoly, which is local service, and apply
structural separation to that as well, because I think that's the
only way you're going to end up with the kind of competition that
And more competition
is what will put broadband access in more businesses and residences,
which is the first necessary step towards wide access to telecommuting.
While increased broadband access is critical, the speed of the data
moving through that broadband has to be dramatically increased,
to further aid its role in business. Bandwidth has reached a temporary
speed limit of a few megabytes per second, as that's about all the
typical "high-speed" cable modem, DSL, and satellite connection
can do. The actual Internet itself needs a serious tune-up, which
it may just get in the next few years. And that tune-up could give
the tech sector as a whole a serious nudge in sales.
pages and low-res photos, the web's current best speed of five or
sex megabits a second is blindingly fast. For audio and video on
the Internet, it's slow and pokey. For example, even with a cable
modem, it still takes a noticeable amount of time for that Rush
Limbaugh audio clip to download. And the current bandwidth makes
many business applications just too slow and unreliable to be cost
effective when used remotely by telecommuters.
of bandwidth is also preventing a number of even more advanced business
and consumer applications from getting off the ground. These applications
include HDTV-quality video conferencing via the Internet, HDTV-quality
video on demand, and from the business perspective
complex Internet-enabled programs.
the deputy director of the Advanced Internet Initiatives Group at
Cisco Systems, Inc., says added bandwidth could lead to new ways
of using computers in the business world. For example, national
or global businesses, whose computers sit idle when their stores
or offices in earlier time zones close, can tap into those computers
and combine their processing power.
A lack of
new applications that can run on current speeds is also a reason
why high-speed ISP stocks are currently in the doldrums or
worse. Excite@Home recently declared bankruptcy and was forced to
sell its core cable modem business to AT&T. There isn't the killer
consumer app that HDTV video-on-demand would naturally provide to
get people excited beyond those already immersed in the Net.
on the Baby Bells
Long term, answers are on the way from a variety of sources designed
to radically expand the amount of bandwidth available from fiber
optics and other "fat pipes." But for individual investors focusing
on the next quarter or two, Craig Shere, a CFA and an investment
officer specializing in telecom services for Standard and Poor's,
says that "the leveraged, pure-play broadband carriers that have
been crushed by the incredible decline in pricing for broadband,
are going to be hurt. These companies thought, 'we'll build it,
and the world will beat a path to our door,' and bet the farm. Well,
now the farm is being repossessed."
Shere says that the companies that will benefit over the coming
months are those that include broadband as part of a diversified
communications strategy, particular those Baby Bells with strong
local service provider cashflows. Two companies that S&P feels positive
about are Broadwing, the old Cincinnati Bell, which S&P has a 'buy'
rating on, and Qwest, which acquired US West in 2000. S&P has an
'accumulate' on Qwest.
suggests that normal capacity utilization in the world's fiber optic
broadband system could be achieved by 2003. Assuming that the stock
market discounts that capacity nine or so months in advance, by
the first or second quarter of next year, these more diversified
broadband survivors "will pick up the pieces when the market finally
and more industries are using broadband to communicate and send
data, there's no question that growth is there and broadband, over
the longterm will flourish. But, as Shere says, the sector is too
young to know if it will always have a boom/bust cycle like other
technology sectors, or if there's some way to smooth out the ride.