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Media
Center > Press Releases
For Immediate Release March 12,
2002
Contact: Rob Stoddard and Marc O. Smith,
202/775-3629 |
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Robert Sachs
National Cable
& Telecommunications Association
"THE BROADBAND
DECADE"
Remarks to
Cable Telecommunications Public
Affairs Association Forum
Washington, DC
March 12,
2002
Welcome! It’s great to see all of
you, including many good friends. It’s been said before, but
it’s important to say again: public affairs—what you do-- is a
critical part of our business. It’s the umbrella for all the
cable activities that give back to the community and for the
many contributions our industry makes to society. That
includes Cable-in-the Classroom, Cable Positive, C-SPAN and
the many, many other cable public affairs initiatives
exemplified by the Beacon award winners that CTPAA will
recognize tonight. Public affairs also provides the tools and
resources that we need to better communicate with our
customers, opinion leaders, and the media. A strong public
affairs program goes hand-in-hand with effective public policy
advocacy. In the increasingly competitive environment in which
cable operates, these activities are all the more important.
So I thank each of you for your individual contributions to
what we do together as an industry.
At NCTA, our role
is to support you and to provide coordination of industry
public affairs activities. In this regard, I am delighted that
my former Continental Cablevision colleague Rob Stoddard has
joined the NCTA team as Senior Vice President of
Communications and Public Affairs, bringing with him valuable
experience from AT&T Broadband, MediaOne and Continental.
Together with the talented group of public affairs
professionals at NCTA , and all of you, Rob is here to ensure
the success of our industry’s public affairs
initiatives.
So please don’t hesitate to call on Rob or
any member of the NCTA communications and public affairs
team.
You could not have arrived in Washington at a
more propitious time. Later this week, the FCC is expected to
determine the appropriate regulatory classification for cable
modem service. This sounds like an arcane issue but it’s one
that has been the subject of lengthy debate and litigation,
and it has enormous implications for American consumers who
benefit by our deployment of broadband services.
We
hope the Commission adopts a course that allows our industry
to continue to roll out rapidly high speed Internet services
in the most cost-effective manner. And should the FCC
determine that cable modem service is an "information
service", then we hope that the Commission will make clear
what this means and also make clear that such services are
inter-state in nature and not subject to a myriad of
conflicting state and local regulations. The Internet is
global in reach and a clear national policy statement
concerning the regulatory status of cable modem service will
provide much needed guidance to the courts, local governments,
and the capital markets.
The topic of the moment in
telecom public policy circles is the strong national interest
in broadband. Witness the Tauzin-Dingell debate in Congress,
various broadband tax incentive proposals, and the Bush
Administration’s leadership in seeking solutions to stimulate
demand for broadband services. So, I’d like to spend the
balance of my time this morning talking with you about the
Broadband Internet, explaining the importance of an
un-fettered regulatory environment, and identifying several
key public policy issues that could substantially affect
broadband deployment. Then, I’d like to leave you with a
vision of the broadband future.
For the Broadband
Internet, this is a time analogous to the early 90’s when the
narrowband, dial-up Internet was principally the province of
first-adopters. A few years later, the dial-up Internet became
a consumer service, and the 90’s had become The Internet
Decade.
We are now in the first part of a different
decade. I believe it will be recorded in history as THE
BROADBAND DECADE.
Why am I so optimistic, you may ask,
when reportedly "only 10%" of Americans have signed up for
Broadband Internet today?
Let’s start with the
facts:
The pace of broadband deployment – and broadband
penetration – is robust.
In the six years since the
passage of the ’96 Telecommunications Act, the cable industry
alone has invested more than $55 billion to upgrade nearly a
million miles of plant with fiber optics. That’s enough fiber
optic cable to circle the globe 50 times! This massive
broadband infrastructure investment, which translates into
about $1,000 per subscriber in upgraded cable systems, is
nearly 80% complete.
Cable’s broadband infrastructure
is the ideal platform for high speed Internet services,
digital video, cable telephony, interactive television and
other advanced services.
More than 70 million
households in urban, suburban, and rural America now have
access to cable-delivered high-speed Internet services. And
7.2 million of these homes have already subscribed. Since less
than 60% of US households own personal computers cable modem
penetration among residential PC owners stands at 17% across
the industry. Where cable modem service has been available in
a market for several years, penetration is even higher. In
fact, Broadband Internet growth has outpaced successful
consumer services such as color TV’s, cell phones, CD’s and
VCR’s.
Cable is offering broadband services in a
vibrantly competitive marketplace. Digital subscriber line
("DSL") deployment and penetration have also showed
significant gains. As of year-end 2001, DSL was available to
51.5 million homes. And the four major DSL providers—Bell
South, Qwest, SBC Communications and Verizon—finished the year
with 3.6 million customers, a near doubling of the number of
DSL subscribers from year end 2000.
Incumbent local
exchange carriers claim regulatory burdens are the reason that
DSL lags cable modem subscribership by a ratio of about 2:1.
While regulation may be a factor in some of the Bell companies
investment decisions, the Bells are rolling out DSL at a rapid
pace. 51.5 million homes represents nearly half the homes in
the US. More significant to cable’s market lead than any
regulatory factors are that the Bells warehoused DSL
technology for a decade before offering it to consumers, and
that consumers report higher satisfaction levels with cable
modem service.
It was not until cable operators
introduced cable modem service, that the Bells finally
responded by offering DSL. So, cable has enjoyed a "first
mover" market advantage, but one totally of the Bells
making—and we should say to them,
"Thanks!"
Additionally, where cable modem and DSL are
available today, more consumers have opted for cable. As
mentioned, 7.2 million of the 70 plus million homes where
cable modem service is available have already subscribed,
which translates to approximately 10 percent of homes passed
and 17% of PC homes passed. In contrast, DSL’s effective
penetration rates are only 7% of homes passed and 12 percent
of PC homes passed.
The fact that more consumers are
choosing cable modem service over DSL has to do with the fact
that it is generally priced 10% to 15% lower than DSL, that
installation is generally simpler, and that cable modem
service offers the user a better on line experience. Indeed, a
recent survey of nearly 5,000 online interviews conducted by
Harris Interactive reported that 80% of cable modem customers
are either completely satisfied or satisfied with their
service compared to just 65% of DSL customers.
Not
surprisingly, therefore, market factors account for cable
modem service’s higher penetration. But make no mistake, DSL
remains a very competitive service, as its growth last year
bears out.
And looking at the broadband market
overall, the cable modem and DSL numbers are impressive. In
fact, of the combined total of approximately 80 million homes
where cable modem and/or DSL service are available, 14 percent
of homes passed and almost one out of four PC homes passed
have taken broadband. And the pace of broadband net surfing
just surpassed more than half of all time spent on line
according to Neilsen//NetRatings.
Best of all, there’s
still plenty of upside! That’s why I’m so optimistic!
The FCC a short time ago reaffirmed that broadband
deployment is on track. In its Third Report on Advanced
Telecommunications Capability, the Commission found "advanced
telecommunications is being deployed in a reasonable and
timely manner," "the advanced services market continues to
grow and … the availability of and subscribership to advanced
telecommunications has increased significantly."
This
remarkable record of steady growth and evolution makes me
confident we are embarked on THE BROADBAND DECADE.
What has the cable industry done to bring us to this
point? I am pleased to say, "A great deal."
CableLabs
designed, developed and coordinated the modem component of
cable’s broadband effort. CableLabs’ Data Over Cable Service
Interface Specification (DOCSIS) process gave cable companies
a uniform set of standards for integrating increasingly
sophisticated broadband capabilities into their networks.
CableLabs counts the availability of more than 180 cable modem
models from almost 60 vendors, a sufficient number to make the
marketplace highly competitive and drive down modem
costs.
Cable companies large and small—serving urban,
suburban, and rural communities-- made the tough decisions to
invest huge amounts of private capital in advanced network and
modem equipment. Faced with marketplace uncertainties, the
decisions by the nation’s cable companies to be the
first-movers in broadband – and the first risk-takers as well
– have been proven correct.
But that’s just part of the
story. Each of you knows all too well that once broadband
service becomes available to a community, the challenge is to
get the word out to every potential customer about what
broadband brings to daily life. It is only then that the
labor-intensive consumer education and installation process
begins.
In the meantime, content providers of all
stripes are doing their thing, designing, developing and
marketing Internet software. It’s hard to predict whether
there will be a single "killer app," and if so what it is
likely to be. But we have every reason to believe that the day
of increasingly sophisticated and versatile broadband Internet
"programming" is coming. We share the FCC’s view that the
Internet has "... entered a commercial phase characterized by
more widespread network interconnection, an explosion of
applications and access to a growing universe of websites
utilizing common, interoperable protocols. Today, many of
these websites have evolved into content-rich information
portals that are matched to the broad commercial, educational
or entertainment demands of Internet users." In short, like
any consumer product, the Broadband Internet must – through
trial and error – find what resonates with consumers.
The cable industry is taking a steady, deliberate and
focused approach, which includes continually enhancing network
speeds and developing home networking solutions. We are
confident this is the right approach.
Some complain
that this is not enough.
TechNet, a group of high-tech
companies, has gained attention in recent weeks, calling for a
national goal of making a 100-Mbps broadband connection
available to 100 million American homes and businesses by
2010. They offer a field of dreams, but overlook that others
would bear the cost of building it.
We should not lose
sight, however, that Field of Dreams, although a wonderful
film, was a fantasy. In the real world, even if TechNet’s
field is built, we don’t know who would come– or
when.
If I can draw a parallel. When HBO launched in
1975, it soon became the “killer app” of that era.
HBO-delivered movies directly to cable systems via domestic
satellite communications. The HBO brand became synonymous with
cable TV. Cable operators of that time didn’t respond to HBO’s
achievement by assuming HBO’s success would be replicated many
times over. They did not immediately build systems capable of
offering hundreds of channels of programming; nor did the
technology exist to do so. But when HBO gave birth to true
consumer demand, cable operators met it, making bold decisions
to invest scarce capital in upgrading facilities and offering
new products.
Today’s cable industry sees broadband in
a similar light. Through long and challenging experience,
cable operators know that building a broadband network does
not guarantee consumer acceptance. In 1985, many of today’s
video staples – HBO, CNN, MTV, Discovery, ESPN and others –
were available to nearly 80% of Americans through coaxial
cable networks. But cable penetration remained in the mid-40
percent range. It took another 15 years of marketing efforts
by the cable industry, aided by the competitive climate of the
late 90’s, for basic cable penetration to reach almost
70%.
I’m optimistic that Broadband Internet has
substantial upside as well. But we must also be realistic
about the pitfalls ahead. We know that government policies
could aid or impede broadband development. Let me cite several
examples: mandated access, digital rights management, and
Internet privacy.
The government’s "hand’s off" policy
has been a vital spur to the remarkable pace of cable’s
broadband development. And industry leaders like AOL-Time
Warner and Comcast have begun to offer consumers a choice of
ISP’s, establishing models for other MSO’s. As a result of a
deregulatory environment, cable’s broadband infrastructure and
services have evolved rapidly. Had government imposed common
carrier type regulation as some of the Bell companies
advocated, cable modem service would still be in the starting
blocks.
The "hands off" the Internet policy stands in
contrast to the close regulatory scrutiny to which cable’s
services were subjected not so long ago. Compare the capital
investment by this industry from 1992 to 1996—in the wake of
regulation imposed by the Cable Act of 1992—to the capital
investment made since 1996—following the de-regulation
fostered by the Telecommunications Act that same year—and,
consider the related consumer benefits.
Any change in
current regulatory policy, however well intentioned, could
hamper the ability of companies’ to respond to market dynamics
and to deter investment and innovation. As FCC Chairman Powell
observed recently: "Broadband is a synergetic product of two
great waves crashing into each other. The first is the mature
and heavy regulated world of communications. The second is the
swift and unregulated peak of the computer revolution. The
world waits to see whether the force of the second will
subsume the regulatory energy contained in the first. It
should and it will if we let nature take its course and not
let the yellow submarine of central planning come crashing to
the surface."
Digital rights management is a less well
known but equally important issue for THE BROADBAND DECADE.
Digital content can be distributed more effectively and in
innovative ways thanks to broadband. But it can also be copied
perfectly and then pirated and distributed worldwide with the
push of the "send" button. Copyright holders need to be able
to determine whether their digital content can be copied
freely, copied once – for time shifted use – or copied never
as in the case of a first run film or video game. Without that
assurance – incorporated in our networks and made to work in
the equipment sold by consumer electronics manufacturers – the
flow of digital material will slow down to a trickle. (Dare I
say stream.)
Finally, it is critical that rules of the
road governing Internet privacy be clear, and apply equally to
all Internet-based businesses as the fundamental privacy
rights of Internet users are balanced against the legitimate
business needs of Internet service and content providers.
When we convene the National Show in New Orleans on
May 6th, our theme will be—"Connecting America." Nothing
better describes—in two powerful words—what our industry is
all about. Cable today is connecting America with reliable,
affordable and innovative broadband services that consumers
value.
I am convinced this will be THE BROADBAND DECADE
not only because of our investments in broadband facilities
and content, but also because our engineers, marketers,
programmers, customer service representatives and every one of
you, will take steps, large and small, to fulfill our
industry’s passionate vision.
In the course of The
Broadband Decade, "killer apps" may develop. But whether they
do or not, we are determined not to confuse real "killer apps"
for imaginary "silver bullets" or discount the steady, growing
desirability of high speed access to a host of broadband
applications.
Cable’s own growth history shows the way.
Today’s video programming networks are now household names.
Each had one thing in common: a great idea combined with very
hard work over a long period of time. Together they led to
higher and higher cable penetration levels over
time.
That’s our broadband vision: Cable’s broadband
infrastructure, bold ideas and years of hard work and
commitment, united with fresh broadband applications,
catapulting the Internet Decade into THE BROADBAND
DECADE.
Thank you very much, and have a great
conference!
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