Competition and Chaos: U.S. Telecommunications since the 1996 Telecom Act

Chapter 8. The Broadband Revolution

Although the Internet did not develop commercially until 1990 and the World Wide Web was not available until 1991, it did not take long for these forces and household ownership of personal computers to create a “Nation Online.”1 Just twenty years ago, only 8 percent of U.S. households had a computer; but by 2003, 61.8 percent had one.2 Residential Internet connections lagged behind the growth in household computers at first, but by 2003 more than 50 percent of households were connected to the Internet (figures 8-1 and 8-2). According to the Census Bureau, between 1998 and 2003 the share of U.S. households connected to the Internet nearly doubled to 54.6 percent, driven by e-mail, e-commerce, and the explosion in the availability of easily accessible information on the Internet. Unfortunately, more recent census data on household Internet use are sparse, but a private research company estimates that there were 79.2 million residential U.S. subscribers in the first quarter of 2004, equal to about 72 percent of U.S. households.3 This rapid diffusion of a new communications medium led to a sharp rise in websites offering a variety of content, including recorded music, film clips, and electronic games. In a very short period, however, Internet users became frustrated by the “worldwide wait” that occurred when they connected to the Internet through ordinary modems at speeds of 50 kilobits per second (kbs). As a result, they began to seek higher-speed connections once the price of the electronic equipment required to deliver such services fell to affordable levels.4 Larger businesses had been able to obtain access through 110 The Broadband Revolution 8 08-1617-6 CH08 3/8/05 7:16 PM Page 110 The Broadband Revolution 111 fast T-1 lines (1.544 megabits per second, or Mbs) for some time, but it was not until 1998 that higher-speed connections became available to households and small businesses through digital subscriber lines (DSL) over ordinary copper telephone loops and through cable modems provided by cable television companies. Alternative Broadband Technologies Residences and small businesses can obtain high-speed Internet access not only through DSL and cable modems but also through wireless and satellite devices.5 Digital Subscriber Line Copper wires (“loops”) that extend from a telephone company’s central office or a remote terminal now serve virtually every household and business 1994 1997 1998 2000 2001 ; ; 2003 ; ; ; ; ; ; ; 24.1 22.1 24.8 22.0 36.6 34.9 37.2 32.8 42.1 39.9 42.9 38.5 51.0 49.6 51.5 46.3 56.5 55.6 56.7 51.5 61.8 10.0 20.0 30.0 40.0 50.0 60.0 70.0 Percent United States Rural Urban Central cities Source: National Telecommunications and Information Administration (NTIA) and Economics and Statistics Administration (ESA), U.S. Department of Commerce, using U.S. Bureau of the Census Population Survey supplements. Figure 8-1. U.S. Households with a Computer by United States, Rural, Urban, and Central Cities, Selected Years 08-1617-6 CH08 3/8/05 7:16 PM Page 111 112 The Broadband Revolution in the United States. Using equipment much like an ordinary modem, telephone companies can transmit data at a high speed over these copper wires. DSL modems can transmit data at far higher rates than is possible over voice-grade connections because they can take advantage of capacity in the copper wire that is not used for voice communications. Asymmetric digital subscriber line (ADSL) service refers to a DSL system in which transmission capacities differ in the two directions of transit—with downloads arriving at much greater speeds than upstream communications. ADSL is particularly useful for web browsing or distributing audio or video programming, and it can operate on the same loop used for ordinary telephone calls. Thus by installing extra equipment at each end of an existing subscriber loop, or telephone line, a telephone company can deliver a high-speed access service on the same line that delivers standard telephony. Unfortunately, DSL is severely limited by the quality and length of the copper loop. DSL connections can be restricted or even made unworkable if the copper loop has been modified with loading coils, which improve voice transmission on longer loops. More important, the ability of copper ; ; ; ; ; 26.2 22.2 27.5 24...