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February 10, 1999 Event
Broadband Access: Overhyped Promise or Promised Land? Not unlike the proverbial death and taxes, the advent of widespread broadband access is a virtual certainty. The timing and impact of its arrival, however, are subjects of much debate. A growing proliferation of cable modem and DSL services coupled with the recent slew of activity between Internet players and telcos signal growing momentum in this area. The stakes are undeniably high. Always-on, lightning-fast, all-you-can-eat bandwidth is a user's dream. Next-generation applications such as streaming media complete with all the bells and whistles will be sexier and more compelling. More importantly, the greater the value proposition for the user, the greater the potential for profit. While narrowband access characterized the early years of the Internet, broadband may herald the next evolutionary step for the wired world. Broadband will fundamentally change how, where, and when people access the Internet. In the short-term, though, accessibility of service is a major hurdle. Dial-up accounts are obtainable nationwide, yet high-bandwidth services are available in barely 20% of the country. In the battle for consumers, it is uncertain whether cable companies, telcos, or both will achieve critical mass. If cable modems win, will TVs become a popular vehicle for accessing the Internet? Or will users prefer convergence on their desktop with more familiar phone-line access? When the dust clears, some format of modestly priced, universally accessible high-speed service will emerge. As broadband technology rolls out more widely and prices become more affordable, the user profile will change profoundly. Today, broadband supply is concentrated in tech-heavy areas and few can afford the price. As availability grows and cost shrinks, virtually all users will leave behind dial-up service. Broadband also will dramatically impact the competitive landscape of the offline and online worlds. Narrowband advantages of existing Internet powers such as optimizing content for download speed and adjusting for the limitations of HTML may no longer count in a broadband world. Broadcast media giants may simply transport their current content-rich offline offerings into the online world with nary an adjustment. An additional concern is the impending regulatory debate between ISPs and cable operators over shared access to high-bandwidth networks. All along, the balance of power may shift with the simple stroke of a pen, since consolidation and partnerships are inevitable parts of the process. Of course, the ultimate success of broadband access will rest with the consumer. If the acquisition of narrowband users were the opening gambit of the Internet, it is possible that the capture of broadband users will become its end game. @Home Suffering Cracks in the Foundation? Kick-Starting The Broadband Net: Need For Speed Hits Portals
Key Learnings
PARADIGM SHIFT
This Is Not Your Father's Oldsmobile
Broadband will induce a paradigm shift not only in the way we use the Internet, but rather in the way we live. The drivers of this shift will both be richer and interactive content and the convenience and ubiquity of always-on access. The Web will become THE media option rather than A media option and ultimately, the notion of broadcast will give way to the more powerful experience of unicast.
As all types of media converge, traditional comparisons of Internet vs. television vs. radio vs. print become irrelevant. The more important distinction is between interactive mediums and passive ones. Broadband will engender both states through passive services that allow consumers to 'lean back and enjoy' and interactive services that encourage consumers to 'lean forward and participate.'
There is a supposed need to sync-up all the different technology gadgets that increasingly are becoming a part of our lives. While the convergence of access devices may seem most important in this equation, it may be the diverse use of the broadband pipe that is more crucial. Perhaps one day, families will have a 'smart' pipe with the ability to serve the specific needs of multiple devices.
COMPETITIVE LANDSCAPE
800 lb. Internet Gorillas vs. 800 lb. Mouse, Peacock, and Fox
Initially, traditional media players may have a slight disadvantage in the broadband world. They have a long history of pushing content to their audiences, while new media players understand two-way interaction. However, strong content puts old media in a powerful position and in the end, quality content will win over audiences. Interactivity enabled by broadband will be the universal value-add.
In every wave of technology, infrastructure begins non-commodity then eventually becomes commodity. Therefore, while it is a competitive advantage in the short term to provide both access and content (a la AOL or @Home/Excite), long term companies such as Yahoo! will be able to compete very effectively even if they do not bundle in access. Owning the plumbing must not be confused with owning the user.
While traditional economics such as user demand, financial opportunity, investor mania, and economies of scale will drive broadband roll-out, simple competition will catalyze it. Fierce battles between the telcos and cablecos, attempts by traditional media players to leverage their content over Internet brands, and the desire of advertisers to build more effective campaigns all will hasten deployment.
KEYS TO ADOPTION
What Dreams May Come
The ultimate success or failure of broadband may not be dependent on improving the technical infrastructure (accomplished with time and money) or the development and/or convergence of devices (accomplished with innovation and execution). Rather the true key may be the creation and ubiquity of broadband products and services for which consumers will be willing to pay significant cash premiums.
Broadband adoption will be fueled by a whole new set of applications currently not possible through any medium. These killer applications will fuse interactivity and personalization with real-time access to people and information. Of course, like every other phase of consumer technology (cable TV, VCRs, CD-ROMs, Internet) pornography will be an early driver of broadband penetration (no pun intended).
Always-on, lightning-fast bandwidth will modify the usage of and behavior on the Internet. In the process, the most powerful transaction channel for e-commerce will emerge, accelerating user-adoption. In particular, broadband holds massive potential for impulse and on-the-spot buying as well as interactive shopping and virtual test-drives from the comfort of one's armchair.
BARRIERS TO CRITICAL MASS
Waiting for Godot
The only thing preventing the explosion of cable modem broadband is penetration. In areas where it is offered, people swear by it and churn is virtually non-existent. On the other hand, DSL is readily available in many areas, yet adoption is low. Why? It's more expensive, requires another phone line, and generally is encumbered by the historic bureaucracy and incompetence associated with the RBOCs.
Enticing new features will draw consumers en masse to pay for broadband access. However, in a chicken-and-egg scenario, it may not be economical for companies to create these features until there is a critical mass of potential users. As a result, in the short-term, broadband only will result in incremental changes to the consumer experience, such as chat on steroids or low-quality streaming media.
The most significant challenge to widespread consumer broadband adoption is making the experience of connection and content easy, unintimidating, and convenient. Furthermore, unlike Silicon Valley, most of the world desires an online medium of defined boundaries rather than an open realm of independence. Broadband will take off only when it becomes as user-friendly and as structured an environment as AOL.
QUOTES OF THE NIGHT
"Instead of watching TV in the corner of my laptop screen and simultaneously sending/checking email by myself, I'd much rather be with friends watching regular TV while doing work on a laptop. It's more social."
"Broadband means a lot of different things to different people. One potential way of describing it: using yesterday's technology, to solve today's problems, tomorrow."
"When discussing broadband, it is important to remember that we're talking about a potential market, not a real one. Still, the ultimate question is not 'if' it will happen. It's 'who' we will be paying to get it."