Joanna Bujes
>Tech Industry Seeks Its Salvation
>In High-Speed Internet Connections
>By SCOTT THURM and GLENN R. SIMPSON
>Staff Reporters of THE WALL STREET JOURNAL
>High-tech executives think they've found a cure for the industry's deepest
>slump in a decade: High-speed Internet access for everyone.
>
>
>For years, telephone and cable-TV companies have been promising to build
>high-speed "broadband" networks, which let consumers and small businesses
>tap the Internet 20 or 30 times faster than conventional phone lines, yet
>the rollout has been slow. There's little agreement, even within the tech
>world, on the ground rules for building such networks, which would cost
>tens of billions of dollars. But suddenly the topic has rocketed to the
>top of the technology industry's agenda in Washington, where traditionally
>distant tech executives are asking for help.
>The chairmen of International Business Machines Corp., Intel Corp.,
>Motorola Inc. and others last week met with key lawmakers and National
>Economic Council officials to support bills that would provide tax credits
>for building high-speed networks in rural areas and economically depressed
>inner cities. Other executives propose broader tax breaks, comparing
>broadband Internet links with the government-financed interstate highway
>or rural electric systems.
>Likening the task to the 1960s effort to put a man on the moon, John
>Chambers, chief executive of Cisco Systems Inc., is asking that the
>federal government commit to making broadband connections available to
>every home by 2010. A Cisco lobbyist calls the effort "our No. 1 goal"
>(although a spokesman says Mr. Chambers doesn't think the government would
>be the one to build the network).
>Some tech executives argue that extending broadband networks would help
>revive the national economy, because tech spending contributed such a
>large share of economic growth in recent years. "The stimulation would go
>well beyond hardware and software providers," says Phil Bond,
>Hewlett-Packard Co.'s top Washington lobbyist.
>High-Speed Hopes
>U.S. households with DSL, cable modem and telephone lines, in millions
>1998 1999 2000
>DSL N/A 0.3 1.5
>Cable modem 0.4 1.3 3.7
>Telephone 98.0 99.1 100.2
>Source: The Yankee Group
>But some analysts are struck by the sudden change in an industry that
>previously distanced itself from Washington. Technology companies "are
>going to Washington looking for a bailout," says Scott Cleland, chief
>executive of the Precursor Group, a Washington-based independent research
>company. "That tells you their situations are awfully bad because when
>times were good they were telling the government to stay away."
>Monday, more than 40 tech executives are set to meet at H-P's Palo Alto,
>Calif., headquarters to rally behind the broadband effort and discuss
>possible policy initiatives. Other tech groups have similar efforts under
>way. Last week's lobbying was orchestrated by the Computer Systems Policy
>Project, which represents big computer companies. "The administration is
>listening carefully to all segments of industry and working with lawmakers
>and regulators to assess policy alternatives to accelerate broadband
>deployment," a White House spokesman says.
>The renewed push for broadband stems from widespread disappointment with
>the Telecommunications Act of 1996, which was supposed to encourage
>competition, particularly for local phone service. But many of the
>upstarts that challenged the Baby Bells couldn't make profits and got hurt
>in the collapse of the high-tech bubble. And companies that built data
>networks to carry an expected flood of Internet traffic are starving for
>business.
>Tech executives fear that broadband deployment will slow even further. A
>year ago, the pace was a secondary concern for big tech companies. Then
>the dot-com bubble burst. Companies cut their purchases of tech gear, and
>executives of tech companies faced declining sales, losses and layoffs.
>Now, potential sales resulting from a new wave of high-speed Internet
>connections look like a port in a storm.
>When Mr. Chambers broached the subject before 50 executives at a February
>meeting of TechNet, an industry lobbying group, 20 hands shot up,
>according to a person who was in the room. TechNet quickly assembled a
>"working group" on broadband policy, including Mr. Chambers and executives
>from Intel, Microsoft Corp., 3Com Corp. and ExciteAtHome Corp. Its
>recommendations are expected in September.
>Executives hope ubiquitous high-speed links can ignite another "virtuous
>cycle" of innovation and spending on tech gear, like the one that
>accompanied the first phase of the Internet in the late 1990s.
>Telecom-gear makers would sell equipment to build the networks. PC- and
>chip-makers would sell consumers new computers to keep up with faster
>connections. Software makers and content creators would update programs.
>"We're convinced now more than ever that broadband is crucial to our
>industry," says Peter Pitsch, an attorney in Intel's Washington office.
>A unified tech industry could be influential in the national debate. "I've
>always felt the computer folks would tip the balance if they ever came
>into the thing in a serious way," says Jeffrey Eisenach, president of the
>nonprofit Progress and Freedom Foundation, a group backed by the Bell
>phone companies that is sponsoring the meeting at H-P.
>But there's little agreement in the industry about how to get the job
>done. The differences are apparent on the central telecommunications
>question facing Congress this year: whether to relax 1996 rules limiting
>the role of Bells in building and operating data networks. Until recently,
>big tech companies were reluctant to take sides because they had customers
>in rival camps. Now, their reluctance may be fading.
>In a speech last week, Intel Chairman Andrew Grove endorsed loosening some
>of the restrictions. That was a bit of a shift for the chip giant, which
>had invested in several Baby Bell challengers in the heady days after the
>1996 law was passed.
>"If we want to see broadband, we have to follow the money, as cruel and
>unfair as it sounds," said Mr. Grove, who lunched with Ivan Seidenberg,
>chief executive of Baby Bell Verizon Communications Inc., the following
>day. Mr. Grove called for "a new approach" in which the Bells "should be
>allowed to invest with the fair expectation of making a lot of money."
>Others blame the Bells for stifling competition, then dragging their feet.
>"I'm afraid if we leave it to existing incumbents, the speed at which
>broadband will progress would not be satisfactory," says 3Com Chairman
>Eric Benhamou. He suggests government-subsidized loans, or tax rebates for
>signing up broadband customers. Most tech lobbyists, though, consider it
>politically toxic to mention those ideas.
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