The Web: The broadband imperative

A weekly series by UPI examining the global telecommunications phenomenon known as the World Wide Web.

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CHICAGO, April 28 (UPI) -- Peter Kastner moved recently to a new house in the suburbs that did not have broadband Internet access -- and felt quite frustrated.

"I had to go back to using a modem, at 24 (kilobytes per second) access speed," Kastner told United Press International. "For a business person, who tries to do some work from home, it was an impossible situation. A colleague sent me some files ... and (it) took about three hours (to download them)."

Broadband Internet access has transitioned from being a so-called luxury just a few years ago to a necessity for many Americans, said Kastner, who is an executive vice president at the Aberdeen Group, an IT research firm in Boston.

"Just as you don't have just one phone line in your home anymore, it's getting to the point where you don't have dial-up access," said Kastner. "All sorts of pressures are forcing this. The Web is not just text and graphics anymore -- it's multimedia. People are buying music online, they are doing transactions online -- they need high-speed, broadband access."

Earlier this week, President George W. Bush made a similar point when he publicly endorsed a plan, which has been languishing in the Senate, to extend the moratorium on Internet taxes permanently.

Speaking at the convention of the American Association of Community Colleges annual convention in Minneapolis on Monday, the president said it was his administration's goal to make sure "we have access to the information that is transforming our economy through broadband technology. I'm talking about broadband technology in every part of our country."

Experts note that broadband technology growth has lagged in some areas, primarily because of concern by developers -- and the venture capitalists that fund their work -- about the uncertain tax environment facing broadband access. Some states and locales tax broadband offered by phone companies, but do not tax the same service offered by cable companies.

"Vendors who pay for the infrastructure now want to see a return on their assets," Kastner explained.

These technology industry lobbyists are pressing legislators in Washington. Cable and phone company providers of digital subscriber lines are raising pressure on senators, which on Tuesday began debate on the Internet tax moratorium.

Anti-tax consumer groups also are making their presence felt, sending e-mail to journalists, holding news conferences and, on Capitol Hill, backing -- at the least -- a compromise offered by Sen. John McCain, R-Ariz., to extend the Internet tax ban for a short period of time. Even the John Kerry presidential campaign has come out in favor of tax-free broadband.

Some legislators are concerned, however, that states and municipalities will lose revenue if the broadband Internet access cannot be taxed.

"It is rare that the United States Senate has had an opportunity to do so much harm with one vote," said Sen. Lamar Alexander, R-Tenn., in remarks on the Senate floor.

Whatever happens, it seems clear that Congress is going to do something to end the confusion for investors and consumers -- perhaps as soon as this week. Some analysts think this new policy, if it emerges as expected, will come just in time for some Internet companies -- and for the economy.

"The White House is staking out a position," said Pete Sepp, vice president of the National Taxpayers Union, a grassroots group in Washington. "They're saying we ought to deal with this issue straight up, and that we need a consistent low-tax policy. The relative clarity of the president's statement leaves little room for interpretation," Sepp told UPI.

Using the power of the government to expand the reach of the technology to rural and underserved areas, President Bush this week signed an executive memorandum directing federal agencies to streamline their "rights of way processes" to make it easier for broadband deployment. The White House also has identified 90 megahertz of spectrum to be auctioned for wireless-fidelity Internet access.

"We rank 10th among the industrialized world in broadband technology and its availability," Bush said in his speech. "That's not good enough for America. Tenth is 10 spots too low as far as I'm concerned."

Though the United States lags Europe and some parts of Asia, broadband access here has soared during the last three years, from 7 million subscriber lines in late 2000 to 24 million today. That increase is changing the way companies do business, and presaging a new era of explosive growth for the Internet akin to the 1990s boom.

"With the fairly rapid increase in broadband, we've seen huge growth in customer self-service," Will Robinson, the industry solutions executive at edocs Inc. in Natick, Mass., a software developer. "Broadband legitimizes the channel for consumers. It's giving them a bigger pipe, and helping make customer service on the Internet better," Robinson told UPI.

Some firms are using online services to allow customers to customize the way their bills are presented to them. For example, instead of a multi-page phone bill that shows a mere list of numbers called, an online bill can display the name of the person or organization called, when they were called and for how long.

This change alone can reduce the amount of billing disputes between clients and phone companies.

"It's the same kind of customization that one sees with a MyYahoo.com type of service," Robinson said. "People are using the Net for more task-based activities. That's pushing a dramatic advance in broadband adoption -- so people can get online and get done with what they want to do quickly. Widespread, high-speed access is a business imperative today."

Customizing bills makes it less likely customers will leave and go to a competitor's offering, Robinson said. "It's a barrier to exit."

Broadband is fundamental for many young people in major metro areas -- those in their early teens, he said. They have come of age in the broadband era and do not know any other way to access the Internet.

"We're seeing behavioral changes because of broadband, too," Robinson added. "The youth market demands always-on connections. They don't have the thought that they have to dial-up, connect, and log on."

Despite the exploding demand, uncertainty over the future status of broadband began last Nov. 1 when the Internet Tax Nondiscrimination Act expired, even though the House of Representatives, earlier in the year, had passed a bill wholeheartedly endorsing the idea of a permanent ban on Net access taxes.

A report by the Congressional Budget Office indicates passage of the new, permanent Internet tax ban would have no impact on the federal budget. But according to a paper by the Senate Republican Policy Committee -- a copy of which was obtained by UPI -- a permanent ban on Internet access taxes would cost state and local governments up to $120 million per year, validating the concerns of Sen. Alexander, a former governor.

"Currently, a number of states are charging taxes on broadband access, such as DSL services," said Richard Russell, associate director of the White House Office of Science and Technology Policy, in a live Internet chat, from Air Force One on Monday. "The President opposes access taxes on broadband," he said.

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Gene Koprowski covers telecommunications for UPI Science News. E-mail sciencemail@upi.com