Rethinking Internet Growth

For every industry there are statistics. The computer industry is one that thrives on statistics. Perhaps the most compelling statistics are also the ones that look the most fantastic and unbelievable. Those are the statistics that point to Internet-related growth -- a growth unparalleled in the history of business.

The problem is, there remains a major impediment to such growth predictions ever coming to fruition. This impediment has nothing to do with overall demand for the Internet and its abundant services; the demand is there all right, and the services are growing.

Before looking at the problem, let’s look at some of the statistics. Last fall, Intel was crowing about filling nearly half its orders online. That’s billions of dollars worth of business being done over the Internet by just one company. The amount of business Intel booked over the Net two years ago was almost nil.

Cisco, a company that supplies the routers over which most Internet traffic flows, handles 72 percent of its orders and nearly three quarters of its customer support over the Internet. Cisco estimates that taking Internet orders and offering customer support over the Net saves the company $500 million per year. That’s a half billion dollars that drops right to the bottom line.

Now consider UUNet, the world’s biggest Internet service provider (ISP). Demand for UUNet’s Internet bandwidth doubles every three to four months. Even Moore’s Law, stating that microprocessor price/performance doubles every 18 months, pales in comparison to Internet growth.

The previous examples demonstrated business-to-business Internet services growth. But what about the much larger business-to-consumer market?

As of this writing, the market capitalization or value of is $23 billion, roughly seven times the market cap of United Airlines and larger than the market cap of the next four largest booksellers combined. Online auctioneer EBay has a market cap of $11 billion. Yahoo’s worth is pegged at $30 billion.

Talk about statistics that are fantastic. Moreover, some experts say Internet growth has just started, with the real growth in demand to come from a yet-to-be-born generation of multimedia applications that target consumers. Here’s where the problem begins.

To usher in this new generation, consumers will need bandwidth. That doesn’t mean the 56 K downloads that the majority of consumers employ while Net surfing. They’ll need the kinds of network access speeds that are one, two, three or more orders of magnitude faster. Some users today get such access from cable modems or from digital subscriber line (DSL) services, which run over existing copper phone lines controlled by the phone companies.

A small minority of homes will have cable modem capabilities in the next few years. But everyone has a copper phone line going into their home or small office. Despite the intense appetite for consumer bandwidth, analysts expect DSL services to be rolled out at a snail’s pace in the next few years. Why?

For one thing, the phone companies, mainly the Regional Bell Operating Companies, or RBOCs, make a fortune selling expensive high-speed services to businesses, such as T-1 lines and related services. There’s no question that DSL services would bite deeply into these revenues. It seems that the phone companies have little incentive to roll out competing services. And as long as they "own" the phone lines that go into our homes and businesses, they can pretty much do as they please.

Lacking widely available high-speed Internet access services, the tremendous growth we’ve seen -- growth that’s been great for business, the economy and our country -- will lag behind its potential. The yet-born generation of multimedia applications, things we’ve only dreamed of, will have to wait.

I like the idea I heard from an ISP executive at a recent conference. Why not take the ownership of the so-called "last mile" phone lines, the ones that go to our homes and businesses, away from the phone companies? Put them under the control of a private company and then make them usable to any service provider on an equal basis?

It sounds crazy, but it was government-supported monopoly tariffs that built those lines in the first place, almost like taxes that we all paid for with our monthly phone bills. Why not treat the lines like public goods, sort of like the roads and highways over which all commerce has equal access for the same fees, such as gas taxes and bridge tolls?

The Internet has cause us to think differently about so many things. Perhaps the question of ownership of these vital links to our future needs rethinking as well. --Bill Laberis is president of Bill Laberis Associates Inc. (Holliston, Mass.) and former editor-in-chief of Computerworld. Contact him at

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