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Broadband arrives at a time when the revolutionary potential of the Internet has still to be fully tapped. The Internet has already led to the creation of a host of new applications, including Web surfing, instant messaging, file sharing, e-commerce and e-mail. Broadband, and its faster “always-on” connections, is serving to accelerate the process of integration of Internet technologies into everyday life. “The dot.com boom was driven by the expectation that the Internet would create a large market for electronic commerce, on-demand content, and online applications,” says Tim Kelly, Head of the Strategy and Policy Unit at ITU. “Broadband brings this expectation one step closer to reality by offering faster speeds and a better platform for the development of content services. In other words, the reality is finally starting to catch up with the market hype.”
The development of broadband content and applications not only needs a large pipe and suitable technological infrastructure, but also an appropriate strategy for service evolution, and an adequate environment for the creation of new content. With broadband, the variety and quality of specialized applications — for instance online entertainment or educational material — are set to increase dramatically. But so too will the implications for issues such as intellectual property rights and security, as more and more material is made available in digital form and exchanged globally. The “MSBlast” worm is an example of how the always-on broadband connections make computers far more vulnerable to infiltration (see our story Broadband and information security). Broadband also comes at a time of technological convergence, during which computer applications are spreading to other devices (such as mobile phones and television sets), and vice versa (for example, voice communications over computers). Traditional browsing and person-to-person communicationsE-mail and its mobile counterpart, messaging, are not bandwidth-hungry applications. But higher bandwidth improves these services in two key ways: it allows for always-on communication and the exchange of larger attachments. Broadband boosts even the most in-demand and fundamental applications already on offer today — indeed, one of the main incentives for residential broadband users is simply to enhance the overall Web browsing experience. In addition, higher speeds can improve the user’s experience of certain types of content, for example, product images and software downloads. Broadband enables shorter downloading sessions. Indeed, some bulk file transfers, such as software upgrades or audio/video files, are simply not efficient without a high-speed connection. Broadband is also having an impact on traditional voice telephony services.
Voice services: prices coming downVoice services over data networks have recently emerged as an alternative to conventional telephony and the lower cost to users is making them highly popular in some markets. Running telephony over general-purpose data networks, such as Internet Protocol (IP) networks, is cheaper due to a number of factors. First, telephony over dial-up connections, charged at a flat rate, or always-on broadband connections, avoids the per-minute charges of a traditional public switched telephone network (PSTN). Second, a long-distance or international call can be placed through a local call to an Internet service provider (ISP), thus bypassing the carrier. In North America for instance, where voice over IP (VoIP) is treated as an “enhanced” rather than a basic service, the ISP can avoid paying the per-minute access charges that telephone companies are required to pay to local carriers to terminate long-distance calls.
A number of different technologies can be used in a single “voice over broadband” call. These technologies include: asymmetric digital subscriber line (ADSL), IP, asynchronous transfer mode (ATM) and cable modems. For business applications using broadband, virtual private networks (VPN) have been a source of significant revenue for service providers. Cable companies have also been quick to enter the broadband VoIP scene in some markets, notably in the United States. Previously, the key barriers to VoIP take-up were not necessarily bandwidth, but rather the integration of network-based voice telephony with convenient handsets and call services (such as making a phone call, call waiting, caller display and voice mail). However, recent VoIP service offerings seamlessly include these benefits on traditional telephone equipment. In terms of voice quality, VoIP approaches, or may even match, traditional fixed-line voice. Many companies have now deployed VoIP solutions. And a number of broadband providers have chosen to add these solutions to their service packages — in some cases at very low tariffs. “Yahoo BB!” in Japan, for example, offers its 2.4 million subscribers free calls to one another across the country. Not surprisingly, subscriber growth has been significant (see Figure 1, top chart). Calls outside the network in Japan are billed at a flat rate of 2 US cents a minute, as little as one-tenth the price of the same call over NTT’s network.
Vonage subscribers in the United States, for example, can pay a flat rate of USD 39.99 per month for unlimited calling throughout the country and Canada via their broadband connection. Both Vonage and Yahoo BB! are promoting their services. This marketing push is expected to help convince users that broadband can be more cost effective than they may think. For example, at the Ann Arundel Hospital, in Maryland (United States), when patients need an additional dose of medication or an extra helping of lunch, they are able to make a voice call directly over the hospital’s Wi-Fi network. Old-style paging buttons have been re-designed to connect to the wireless handsets of staff anywhere in the building. Indeed, voice over broadband can transform almost any device (PC, laptop, tablet PC or medical console) into a voice communication device. Growth of VoIP traffic is a worldwide phenomenon. At the end of 2002, VoIP traffic accounted for more than 10 per cent of all international traffic. Only four years ago, it accounted for a mere 0.5 per cent (see Figure 1, bottom chart).
Entertainment and public servicesVideo With the widespread popularity of video entertainment, video applications are considered by many Internet users to be the principal raison d’être of broadband technologies. Even though the quantity and quality of streaming video is still limited, Internet users can already enjoy live news broadcasts and pre-recorded programming. And the future promise of such uses is even brighter as quality increases.
Once video content becomes more widely available, and with higher resolution and screen sizes, one of the main benefits of broadband connections for users will be the possibility to watch what they want, when they want. Video on-demand via broadband is already available in some parts of the world and could drastically change the way people watch television. As an example, the broadband portal “now.com.hk” in Hong Kong, China delivers true video-on-demand to broadband subscribers, including premium content such as first-run movies or live sporting events. As early as 2001 in the Republic of Korea, SBSi, the interactive division of the Seoul Broadcasting System, began offering streaming video programmes, such as soap operas. The cost to users was 40 US cents a show. The service has attracted 1.8 million registered users, and many more are signing up every day. In Japan, users benefit from high definition television (HDTV) programmes delivered to them directly over fibre-optic connections. These programmes arrive over fibre and are viewed on the television set, but they could just as easily be viewed via a personal computer or be saved on the hard drive of a digital video recorder for future playback. Japan’s fibre networks allow for very high-bandwidth HDTV signals. However, many DSL and cable technologies are not fast enough to offer a digital signal for high-definition television. New compression technologies and faster line speeds continually improve the quality of the picture above and beyond that of traditional television. However, it will take some time before broadband television catches up with traditional television.
Public servicesIt is not only commercial, entertainment-oriented applications that are set to benefit from broadband, but the public sphere also provides a rich terrain in which to develop and promote services, especially given the price advantage of broadband over comparable leased-line networks. Moreover, and perhaps most significantly, it is through the government’s promotion of online services that economies benefit most in the long term: raising educational and health standards are recognized factors in improving economic status. Already in some countries, the public sphere has been transformed by e-government initiatives, with, for example, citizens filing their tax forms, or registering for various public services over the Web. These and other public services, such as health and education, stand to benefit from the possibility of higher-speed connections, particularly through the extension of access to underserved or rural communities. Whereas the impetus for commercial services has largely come from the private sector, albeit on the basis of a favourable market and infrastructure environment, public service initiatives have been hugely boosted by governments that have been willing to foster content development with a view to better meeting users’ needs. Content in a high-speed worldBundling and unbundling contentIn their endeavour to exploit the potential of broadband technology and services, broadband operators, ISPs, content providers, and the entertainment industry are studying new partnership models to offer a more complete range of services and applications and gain access to users, at the same time as guaranteeing revenues.
In 2001, one of the largest providers of dial-up Internet access, AOL merged with the entertainment giant Time Warner, and began upgrading its portal for broadband, providing more high-bandwidth content, such as full-motion video news, CD-quality audio, and video from the company’s Time Warner division. In an attempt to maximize its market and counter the erosion of its subscriber base, AOL started an unbundled subscription to its portal services in addition to its standard access package. This is akin to a “bring your own (broadband) access” (BYOA) solution, and reaches a wider number of broadband users. However, this strategy did not seem to bring about the desired result, and the company was losing clients steadily — at least until the deployment of AOL for Broadband, an effort to convert AOL dial-up customers into broadband users. A different example of partnership can be found in Japan, where Softbank Corporation, the holding company of the DSL provider Softbank and the ISP Yahoo Japan, launched Yahoo BB! — a service providing both broadband access and innovative high-speed services in the country. By June 2003, Softbank had managed to attract some 2 822 000 subscribers — about 30 per cent of the market — thanks to its low prices and diversified services (e.g. IP telephony, WLAN hotspots, and access to films and other content). However, the shift from free to paid access, which becomes financially unavoidable when offering enhanced content, such as movies or music that are usually subject to copyright, is not easy. Internet customers have exhibited their unwillingness to pay for such content, especially if it can be obtained free of charge from an alternative peer-to-peer (P2P) source. Linking access and content allows players to have a closer (billing) relationship with their customers. It is akin to a one-stop-shop solution that includes all the services needed, and gives ISPs the opportunity to diversify their revenues. This is important when taking into account the decline of the online advertising market. In the United States for example, Yahoo receives a cut of subscriptions and will share its advertising revenues with the telecommunication company. Yahoo BB! In Japan makes a web page available detailing which part of the user’s subscription rate is for ADSL access (Softbank BB), dry copper line rental (NTT), ISP (Yahoo Japan) and other enhanced services, such as voice over IP. There is also a second type of content provider in the Internet market, which traditionally offers its products offline, but is now exploiting the potential of the Internet to widen its reach. Newspaper and magazine publishers, for instance, now offer online subscriptions and news channels, and entertainment players (recording companies, film industry, etc) are beginning to make their entrance on the online market. Traditional multimedia companies are also making an appearance on the Internet stage. Although there are still many legal and regulatory issues to be resolved, in recent years many companies have started offering music online. A recent example is Apple iTune, which allows users to download a single song starting from USD 0.99. Other services, such as MusicNet or PressPlay, propose a monthly subscription fee, which gives access to a certain number of services (e.g. streaming and downloading). These activities open the door for future developments in the broadband market. For the time being, however, bundling access and services seems to be the most viable method to help the diffusion of this service, and to attract less technology-enabled users.
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Broadband arrives at a time when the revolutionary potential of the Internet
has still to be fully tapped, and is serving to accelerate the process of
integrating Internet technologies into everyday life
