EventReview

Washington D.C.
January 23, 2002

[itvt] Issue 4.25 2/17/02

By Dan Brown for [itvt]

The Broadband Outlook 2002 conference, held on January 23, 2002, at the Four Seasons Hotel in Washington, DC, attracted nearly 140 participants. The day-long conference included speakers from Federal agencies, communications law practices, and the industry's most prominent companies. The conference consisted of five panel discussions, two keynotes, and two presentations. The first half of the day focused on broadband regulatory policy and the second half on the business of broadband.

The conference began with a welcome from Richard E. Wiley, senior partner at Wiley, Rein & Felding, a communications law practice based in Washington, DC. Mr. Wiley introduced Nancy Victory, assistant secretary for communications and information for the US Department of Commerce and administrator of the National Telecommunications and Information Administration.

Ms. Victory delivered the morning keynote, in which she defined her agency's efforts to define broadband and solicit feedback from the industry. She indicated that the Bush administration values broadband as an opportunity to improve the lives of Americans by creating jobs and offering new services. She highlighted the Request For Comments issued by the agency at the end of 2001, and credited this and other outreach activities with helping determine the role of government in the deployment of broadband networks.

Ms. Victory continued her talk with an outline of the NTIA's five-point framework meant to guide the federal government in establishing its role in broadband deployment. This framework included promoting market-driven deployment, competition through rational facilities development, technology-neutral paradigms, geographically sensitive policymaking, and effective enforcement of regulation.

The NTIA plans to use this framework to weigh the input received from the Request for Comments and judge how best to balance supply and demand. Ms. Victory compared broadband policymaking to a gymnast on the balance beam: "You need to keep well-grounded and have all parts of the policy moving in coordination in order for the overall approach to be effective."

The morning keynote concluded with the idea that while broadband presents massive opportunities, success depends on "a regulatory policy that eliminates unnecessary impediments to deployment and promotes full and fair competition." Indeed, these ideas emerged as themes throughout the conference.

Two panel discussions followed the morning keynote. "The Money," moderated by Gary Arlen, included Blair Levin, telecommunications and media analyst for Legg Mason, and Tom Wolzien, senior media analyst for Sanford C. Bernstein & Co. LLC. Mr. Wolzien considered revenue sources for broadband and predicted that advertising will need 2 or 3 years to get back to 6% or 7% growth. Mr. Wolzien's comments set the stage for the afternoon panel, "The Show," which included speakers from three content providers, each of whom rely on different business models to varying degrees of success.

Mr. Levin also introduced concepts that would be echoed throughout the day. He pointed to poor provisioning as the primary cause for slow adoption rates - an idea that was explored further in market research presented by the Consumer Electronics Association. Mr. Levin also highlighted bundling, an issue close to the hearts of many broadband providers. With bundling, however, providers have not found the magic combination that both plays to consumers' desire for convenience and alleviates concern for large bills.

Lastly, Mr. Levin addressed the issue of cannibalization, in which broadband providers gut their core business either through the opportunities offered by broadband, or by attempting to mollify business partners who might be threatened by their entry into broadband. As an example, Mr. Levin offered Discovery, which has twelve networks demanding original content and diluting the demand for advertising.

During the question-and-answer session, Mr. Levin and Mr. Wolzien considered metrics for broadband success. Mr. Wolzien said that using time online was not appropriate because that is merely a measure of cannibalism - how much users are not using other communications technologies. Mr. Levin suggested that metrics were premature: he is still waiting for broadband products worth paying for.

The subsequent panel and presentation discussed regulatory policy issues ranging from slow rollout and demand gap to legacy subsidies and the pseudo-competition of an industry with only a handful of players. Dorothy Attwood, chief of the FCC's Common Carrier Bureau, attacked the root of the issue: the definition of broadband.

Broadband, for the time being anyway, means different things to different people. While interested parties define broadband based on their particular angle, the great unifier is the search for value. For this reason, says Ms. Attwood, a regulatory policy will be slow coming until it can treat all the interested parties similarly.

Over lunch, conference attendees heard a keynote presentation from Kenneth Ferree, chief of the FCC's Cable Services Bureau. Mr. Ferree agreed with analysts that "broadband deployment and development will be the key ingredient in a robust economic recovery." Although getting there from here has no easy answer, Mr. Ferree succinctly captured six main issues facing the industry.

1. Repeated comparisons to South Korea's broadband deployment make no sense because they do not have the same geographical challenges.
2. Although open access is a good thing, it is important to ask, "What would be the specific public-interest benefits of a pure open access model and what would be the probable costs?"
3. The "if you build it, they will come" approach, which would require government subsidies in order to be successful, is not realistic. "It is the consumer who will drive this revolution."
4. Critics say that cable companies are intentionally limiting their broadband infrastructure to avoid competing with their core business.
5. Repeated comparisons to South Korea's government-subsidized broadband deployment make no sense because the cost structure differed due to the different geography.
6. For broadband to take off, the industry needs to develop mass-market benefits. Although the US has no immediate need to "circumvent the existing telephone network," there might be consumer interest in supplementing those services.