In the Internet age, broadband has become the holiest high-tech grail. For the better part of a decade, the digerati have predicted that a wave of high-speed links for consumers and small businesses -- links that would pave the way for everything from videophones to instant digital-music downloads to lightning-quick sales-figure uploads to lagless day trading -- was cresting overhead. You'd think by the way CEOs, particularly Internet CEOs, breathlessly repeated the word broadband that they were talking about how they made their first billion. But launch dates for the promised massive deployments of consumer broadband technologies were always slipping, pushed off to some squishy date in the future, like Octember the first, as Dr. Seuss would say.
At long last, though, the effort is beginning to bear fruit. Throughout the '90s, legions of companies spun webs of phone lines and coaxial cable, built transmission towers, and launched satellites to deliver broadband, in its various forms, to the masses. As a result, 5 million broadband lines will reach into people's homes by the end of the year, according to Forrester Research, a high-tech research firm. By the end of 2003, the number will jump to 27.4 million. For businesses, the numbers are at least 10 million and 16 million, respectively. Octember the first, it appears, is nigh. Are you prepared? Below, 10 burning broadband questions answered.
1. Dumb question first: What is broadband?
In a word, it's speed. Broadband refers to a variety of technologies that can transmit digital bits at blistering rates. In essence, it's the difference between a water faucet and a water main, meaning that resource-hogging applications like massive databases, as well as video and music files, can be downloaded without the World Wide Wait. Imagine speeds dozens of times faster than conventional modems. Modems sip; broadband chugs. Convenience is another plus. Forget about your modem's R2D2-style negotiations to connect to the Net. Broadband technologies maintain a constant connection -- in geekspeak, they're "always on."
2. And how will all this change the world?
Broadband will likely make the Internet as reliable as a dial tone and as ubiquitous as power outlets. Just as telephone usage is so pervasive that it's become almost invisible (you don't see headlines about the different ways companies conduct commerce "via the nation's telephone system"), so too will the Internet blend almost imperceptibly into our daily lives. "If it gets deployed broadly, it will be the enzyme that brings the great promise of the Internet to life," gushes John Sidgmore, vice chairman of WorldCom, which has probably sold more broadband connections to businesses than any other company.
3. So what are the killer aps?
Companies will be able to transmit reams of data with startling efficiency. Using fast, clear videoconferencing, students will be able to tap into lectures from universities around the world, and patients with rare disorders will be examined remotely by some of the world's greatest specialists. Vast libraries of music, movies, and photographs will be accessible in an instant. While shopping, consumers will be able to "handle" objects virtually for closer inspection, or use a digital likeness to try them on for size.
It may not sound sexy, but the always-on connection, and the instant fix it supplies, is apt to be a big draw in its own right. You'll get instant business data -- the traveler's forecast, B2B Yellow Pages, stock quotes, reservations for a client dinner -- all without waiting so much as an instant for a hookup. The rise of broadband should also help connect work and home. The technology's speed means that people will be able to access sophisticated programs once available only at work. Networked homes will also become more practical, so even while workers are chained to their desks, they can log in to their homes, set their digital video recorders to tape The West Wing, turn on the air conditioner, and take a quick look at the maid-cam to make sure Suzie's not rifling through the jewelry box.
4. What exactly are the various technologies?
Digital subscriber line (DSL) technology uses the same copper telephone lines that haul your voice calls, but employs digital wizardry to dramatically increase the capacity of those lines. DSL itself has many variations (ADSL, SDSL, and VDSL to abbreviate a few), some of which can be shared with regular phone service. DSL can zip data at speeds reaching 1.5 megabits per second (mbps)-fast enough to send the complete text of Moby Dick in about 16 seconds.
Cable modems transmit information through the same coaxial lines that feed television signals to television sets. Providers of Internet-enabled cable TV split the cable wire once it reaches the home, and send one branch to the PC, the other to the tube. In other configurations, Internet access heads directly to the television, allowing Web browsing and e-mail capability through the trusty Trinitron. Speeds are generally faster than those for DSL.
Fixed wireless (a.k.a. multichannel multipoint distribution system, or MMDS) is based on technology once used to transmit analog television signals. Fixed-wireless systems use towers that beam data to a wireless modem that resembles a pizza box and is affixed to the side of your house. Now digitized, fixed wireless can reach speeds that can outstrip DSL and cable modems, depending on how they're implemented. One variant, local multipoint distribution system (LMDS), can be 25 times faster than DSL.
Satellite solutions work by means of those mini-dishes used for DirecTV or similar satellite-television services. In places where phone and cable infrastructure doesn't exist -- rural areas, developing nations -- satellites are the most popular solution. Speeds can reach up to 64 mbps for business use, or 2,000 times the speed of analog modems. You'll get Moby Dick in less than a second.
5. Okay, what are the hurdles?
Virtually all of the technologies have limitations. DSL is highly dependent on the distance between a business or residence and the telephone company's central office. The service, therefore, isn't available in rural areas or even in some suburban locations. Because cable-modem system users share a connection with their neighbors (cable is generally a residential solution), access can slow to a crawl if the gum-snapping 13-year-old down the block decides to download the complete works of the Backstreet Boys. Call it the dorm-shower effect: You don't get the hot stuff if everyone is using it at once. Also, fixed-wireless and satellite services rely on what's called line of sight -- the transmitter must be clearly visible to the receiver -- so if lousy weather rolls in, the connection can suffer.
Another downside: Many of the services -- some DSL systems, some cable systems, and satellites -- have lousy upstream speeds. In fact, they deliver uploads at the same pokey speed of phone lines. It may not sound like a big deal, but tell that to an architect trying to move floor plans online.
6. So that's the bad news?
Not quite all of it. The Web is a shared resource and, as such, is vulnerable to poorly maintained networks and Frankenstein's-monster-style Web sites that no high-speed connection can surmount. There are weak links and choke points everywhere, right down to the PC level (a shortage of RAM and slow processors can gum up the works), and no one has a comprehensive solution. "You can't get to a broadband future without eliminating a continuous series of bottlenecks between the end user and the network," says high-tech oracle Roger McNamee, of the venture capital firm Integral Capital Partners. "And there is no silver bullet."
Much of the delay in introducing broadband has been due to the high cost of traversing "the last mile" -- the distance between the Internet's high-speed arteries and the jack in the back of your PC. Advances in technology have brought down costs, and competition has prompted the local telephone and cable monopolies to begin to invest in the necessary infrastructure. But the days of fast, cheap hookups are still a way off, not least of all because customer satisfaction isn't something that has traditionally concerned fat, happy monopolies. In other words, the last mile may be a long one.
7. What about security and privacy issues?
Internet-security experts are among the most paranoid people to walk the earth -- and with good reason, given the alarming shortage of engineers talented enough to guard major commercial technology systems. Their biggest fear about broadband is the always-on connection.
Unlike the toe-in-the-water usage of dial-up modems, in which users connect and disconnect, broadband users are live on the network 24/7. It stands to reason that the more you're on, the more vulnerable you are. "Dashing across the road is not the same as dancing nonstop on the double yellow line," says Steven Bellovin, a security researcher at AT&T and one of Net security's sage elders. Another threat: When a conventional modem negotiates its connection, your machine is assigned a different Internet Protocol address every time. Cable modems and other broadband solutions generally have fixed IP addresses. "That means if your system is in fact vulnerable, an attacker can find you again and again, and keep coming back for more," warns Bellovin.
Not scared yet? Imagine a hacker commandeering your company's computers and high-speed links to mount the kind of electronic assaults launched earlier this year. Those attacks -- against the likes of Yahoo and Amazon -- relied exclusively on breached computers that had enough broadband capacity to inundate commercial Web sites with garbage bits. And they can cost companies billions in lost business and other damages. Sure, security experts are constantly at work trying to hackproof their systems, but it's a Sisyphean task.
8. All right, so how can a person get filthy rich off of all this?
Any company that can devise a more efficient method to bridge the last mile and bring high-speed links to homes could well have a winning idea. The same goes for a firm that figures out how to maintain DSL's highest speeds over long distances. An outfit that comes up with a video-compression technology that improves the quality and reliability of videoconferencing over the Net should also do well. Content companies developing Net-delivered music and video have already begun to spring up, and Hollywood is sure to want a way to deliver movies. And voice recognition ("Computer, book a flight, a car, and a hotel room for me to see our bankers in Dallas next Tuesday") could flourish.
9. Which companies are hot right now?
Today's broadband front-runners are largely infrastructure oriented. These include companies that lay the broadband pipes, so to speak, such as WorldCom, AT&T, Qwest, and Level 3. They also include equipment manufacturers, such as Cisco, Nortel, Lucent, JDS Uniphase, Ciena, PMC-Sierra, and Applied Micro Circuits, that make the gear to keep water flowing quickly and smoothly through the pipes.
Outfits that deliver broadband to consumers make up another group of leading players. Phone companies like Verizon and SBC Communications are aggressively rolling out DSL. Firms such as Covad have grown fast by working with Internet service providers and, to a lesser extent, telephone companies to deploy DSL. Companies like Excite@Home, Time Warner, and AT&T are leaders in cable modems. And Hughes and Echostar are satellite Internet players for home-users.
10. Which companies will be tomorrow's leaders?
Smaller upstart players are riskier bets than established giants like Cisco and AT&T, obviously, but they can produce big returns, certainly in the short run. The 27 network stocks that had initial public offerings in 1999 gained an average of 477 percent, according to Renaissance Capital, an institutional research firm. Metromedia Fiber Networks, which specializes in building fiber-optic networks for the local loop as opposed to the long haul (local is a less mature business with fewer competitors than long haul), is a favorite of Munder NetNet portfolio manager Alan Harris. "The RBOCs [regional Bell operating companies] have been signing deals with them for extra fiber in their own marketplaces," says Harris, a veteran tech-stock analyst who also likes cable-modem builder Terayon because of its position as a top supplier.
Other analysts tout networking-gear companies like Juniper, Sycamore, and Foundry. Relative newcomers, Juniper and Sycamore are holding their own against stalwarts like Lucent and Nortel by producing less expensive and sometimes more efficient technology. And Foundry, which makes routers and switches for gigabit networks, aims to increasingly supply gear to the likes of AOL.
Some winners could even come from -- gasp! -- the Old Economy. Corning Inc. manufactures many of the same kinds of equipment (lasers and filters) that JDS Uniphase makes. The difference, says Kevin Landis, manager of Firsthand Funds, is that Corning mass-produces them especially well. "It might not be the better mousetrap that wins," says Landis. "It may be the more manufacturable mousetrap that wins." He also likes companies that help broadband providers avoid data traffic jams. His picks: Harmonic, which provides equipment for cable companies, and Osicom, which makes gear for phone companies.
Another group of potential highfliers: companies building constellations of satellites to offer broader and more practical high-speed satellite connectivity. They aren't public yet, but two to watch are @contact and Teledesic. The brainchild of cellular god Craig McCaw, Teledesic's 288-satellite project is estimated to cost more than $10 billion to build, but investors like Bill Gates and Saudi Prince Alwaleed Bin Talal are footing much of the bill. The orbiting "birds" will be capable of sending Moby Dick through the ether in less than four tenths of a second. At least that's the plan. The system, delayed for a year because of investor concerns, is now expected to launch in 2004. On or about Octember the first.
