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2/19/2002
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Industry Comment: The Home Office: Broadband's Best Hope

Telecommunications will change society, Bob Rubin says. But it will happen slowly, and not in the way you're anticipating.

It's clear from listening to news reports that the telecommunications industry was severely punished for its overreaching optimism. In retrospect, the articles forecasting rapid consumer adoption of broadband computing were laughable. Most people who could've signed up for service (perhaps 80%) haven't bothered to do so; there's significant overcapacity.

The market valuations of the highfliers are a fraction of what they were two years ago. Think about Lucent Technologies, Northern Telecom, and Corning. Reflect on the condition of AT&T, which misunderstood the meaning of the word "strategy." Broadband computing is indeed coming, but at a much slower pace. And it will arrive in a different way than industry analysts predicted. The great move to broadband won't be fueled by consumer demand, but by businesses.

Let me explain. Some technologies are self-evident in their value. Hook up a businessperson or a teen-ager to a cellular telephone, and you have a match made in heaven. Once an affordable price point was reached, cell-phone growth took off exponentially. The same thing happened with DVD players. People were already familiar with using the videocassette player to view movies; DVD's superior quality and ease of use made it perhaps the most rapidly adopted new consumer technology in history. Not so with broadband.

Most consumers use their computers mainly for E-mail and some Web surfing. You don't need to spend an extra $20 a month--roughly double the price of a dial-up connection--to send instant messages or to loiter in chat rooms. But price alone isn't the bottleneck to adoption of cable modem and digital subscriber line service. The real killer is the hassle of installation and maintenance. It doesn't take much in the way of horror stories to convince the average person that it isn't worth the pain or potential aggravation to sign up for a fast Internet service. Combine high price with limited perceived value, topped off with a complex initiation process and generally rotten support, and it becomes difficult to create a groundswell of enthusiasm among your potential customers.

However, give people some really significant advantages, and the situation changes. For example, I have a high-speed local area network in my house with wireless capability. I can work from my home office or on the back patio with equal ease. Would I willingly give up these tools and go back to working in an office five days a week? Not while there is a breath of life in my body.

Most businesses are staffed by people traveling every morning to a common location and back home again at night. For some occupations, such as assembly-line workers, that's a necessity. But it's not a necessity for as many occupations as we might think. When companies recognize they can save money and increase productivity by having customer-service staff, accountants, computer programmers, and a host of other professionals work from home or satellite offices, then broadband technology (whether cable, DSL, or satellite based) will take off. So, again, the great move to broadband will not be fueled by consumer demand, but by businesses. In such an environment, going to an office to meet with your colleagues will be an event, not a daily chore.

Once businesses lead the way, consumer demand will follow. People with high-speed Internet service at home will do more shopping and most of their banking over their PCs. Trips to the mall will be social events (even more than they are now). The impact on society will be significant: less congestion on the highways, a decrease in pollution, and a marked increased in consumption of nibble food by the computer.

What will make the change happen? Convenience, good customer service by the Internet service providers that manage the lines, secure connections to permit confidence that company data won't be compromised, and cost-effective (for the business client) pricing. When these conditions occur, it won't take companies long to realize the competitive advantages of being able to offer a job to a parent with small children or a willing worker in a rural area. At that point, we will have reached the tipping point at which broadband technology becomes the norm, not the exception.

A whole lot of questions need to be answered. How will cities cope with lost taxes if commuters don't commute? Will transportation needs drop sufficiently to make a meaningful dent in the amount of oil the United States needs to import? How do most of us learn to manage--and be managed--at a distance? But this fact remains: The change is coming, and smart businesses will begin to get ready.

Robert M. Rubin is CEO of Valley Management Consultants, a firm specializing in E-business and IT strategy, organizational design, and evaluation. Before joining VMC, he was senior VP and CIO for Elf Atochem North America, a $2 billion diversified chemical company. The recipient of multiple industry awards, he's a contributing editor to InformationWeek and a member of its advisory board. Talk with him about this column--from your home or office--in his discussion forum.

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