Chart: Broadband Vs. Dial-Up Growth
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Layerone Holdings Inc. gets paid handsomely to solve some of the most complex technical problems in telecommunications, but even it was stymied by the broadband debacle. In mid-2000, the Dallas-based company, which links the disparate communications networks of such clients as Verizon, Qwest and Yahoo!, went live with what it hoped would be a Web site that captured its image: a fast-paced start-up at the cutting edge of technology. Graphics flashed, the case studies of its clients' successes rolled like Hollywood credits, and garishly colored logos in brassy fonts pulsed on and off at random. The site, like the hype over broadband, seemed too restless to stay still for more than a few seconds.

Explains Alexander Muse, LayerOne's CEO: "We figured everyone would not only have high-speed access but also high-speed wireless access before long. So we created a Web site for the fast Internet. Twenty different telephone companies and numerous cable companies were selling broadband, so how could it fail?"

LayerOne's reasoning couldn't have been more wrong. Complaints began almost as soon as the site went up. Many of the sales people and network specialists at the telecom firms that make up LayerOne's client list work at home, where they only have dial-up connections to the Web—no cable modem, digital subscriber lines, satellite or fiber optics. Their main gripe: The site's many frills made simple tasks like looking up basic technical specs and pricing information a long and frustrating experience. At first, Muse admits, he wasn't sympathetic. "We told them to get a faster Internet connection," he says ruefully. "And if they couldn't now, we told them they'd certainly be able to get one soon."

Muse changed his tune late last year, after he and his family moved to a new neighborhood in Dallas—one with no broadband service, and no timetable for installing it. The first time he tried to get on LayerOne's site from his new house, he found himself staring at a screen filling at a slothful pace when all he wanted was one little piece of information. Finally feeling his clients' pain, Muse immediately ordered LayerOne's technical staff to tear down the company's site and rebuild it with simple, text-based links and no Flash graphics. The refurbished site launched in late 2001. In all, LayerOne spent nearly $100,000 on its cyberspeed detour—not to mention the possible lost revenue it suffered when prospective clients simply gave up rather than wait for the old site's pages to load. "Our site was an example of Web designers and marketing people run amok, driven by a corporate strategy that was way too optimistic about high-speed Internet," Muse says. "The good thing is we are all coming back to reality now. At this point, broadband is a foolhardy and expensive technology to build your future on."

Bad Deal

The true cost of broadband's woefully slow rollout is well represented by LayerOne's experience, which in one fashion or another has been repeated in any number of corporations.

Only about 21 million Americans had high-speed Internet access at the end of November, according to Nielsen//NetRatings—about 20 percent of those with online access. The result: Many companies have had to shelve key portions of their business plans and tone down growth estimates tied to broadband acceptance to generate revenue—or have already gone bust in the attempt. Among them: dot-com start-ups whose business models depended on broadband to pipe such technologies as interactive video and streaming media to their customers, as well as Fortune 500 firms that had planned to build sprawling portals offering enhanced e-commerce with high-bandwidth 3-D movies and music.

Meanwhile, lagging broadband deployment has slowed the growth of telecommuting and hurt the productivity of companies with employees who do work at home and are stuck with tedious dial-up connections. Productivity for workers at home increases 20 percent when they move from dial-up to broadband, according to the Institute for the Study of Distributed Work, a Sonoma, Calif.-based technology think tank. While the number of telecommuters grew from 3.4 percent of the work force in 1995 to 4.7 percent in 2000, it's been static in the past year.

Broadband's disappointing performance requires CIOs and IT executives to perform a delicate balancing act, simultaneously implementing potentially lucrative and productive broadband Web applications while also moving gingerly to offer such services in a form that takes into account the limitations of dial-up. And they must do this without completely losing broadband's high-speed advantages. With all of this, telecommunications experts fear that the worst outcome of the broadband roadblock is that it is hampering development of the next killer application—which will more than likely be an offshoot of speedy access to Web data over wired and wireless networks—and is hurting economic growth in the process. "At some point, you have to accept that universal broadband is good economic policy," says Rory O'Connor, vice president of strategic communications at Washington, D.C.-based Dittus Communications Inc. O'Connor is also a lobbyist for the electronics industry and a broadband advocate.

The hope now is that the impetus to build high-speed Internet access will come from the big players, such as Microsoft and AOL Time Warner, who will benefit most from its increased acceptance, and not from the government or the local phone and cable companies that control the last mile. But even that will have to wait for a stronger economy and the lessening of the mountains of debt taken on by the telecom industry in the past five years.

This article was originally published on 02-25-2002
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