Insights hed: Internet slump short-term dek: supply and demand will converge-in about five years. by James Mathweson

I have been covering Internet-related technologies for COMPUTERUSER since the last time my baseball team--the Twins--had a competitive ball club in the early '90s. This does not make me an expert, but it does allow me to take the long view in evaluating Internet progress. If you get too caught up in the events of the last year, you can lose sight of the big picture, which resembles an entire baseball season rather than a week-long slump.

As I write this, my team has just lost nine of 11 games after winning 14 out of 16 before the All-Star break. A week ago, the division title seemed like a sure thing. Now, fans are full of doubt. A year ago, the Internet was not just a sure thing, for many analysts, it was the only thing. Now, all things Internet are highly doubtful to industry insiders. Baseball men often say, "You are never as good as you seem when you're hot and you're never as bad as you seem when you're cold." Just as baseball fans often lose sight of the overall mean between frequent extremes, Internet analysts have lost sight of the moderate view. In my moderate view, the Internet will have many hot and cold streaks over the next five years, but it will steadily grow over that time into a mature medium.

The host of adjustments facing the Internet can be divided into two basic groups: the supply side and the demand side. The issue you hold in your hands is mostly concerned with the supply side--the challenges facing Internet service to businesses and consumers. Our annual March issue on the Web concerns itself with the demand side--why people want to connect to the Internet in the first place. I don't want to wait until March to talk about both sides of this issue. But space demands that I deal only with the supply side here and continue with the demand side next month.

So far, the supply side has struck out with me. After signing up with Qwest DSL, I had Murphy's Law version of DSL deployment--whatever could go wrong did go wrong. First they sent me equipment for the PC, though I ordered the kit for my Mac home system. Then they tried to convince me to use it anyway despite the fact that the routers' firmware is incompatible with Macintosh systems. When I finally got them to acknowledge that the PC stuff would not work, they told me to send it back. Now they won't acknowledge the return and are threatening to cut off my local phone service. The experience included several hours on the phone, a small fraction of which consisted talking with live, though largely unhelpful, tech support personnel. Even if everything had gone smoothly, it still would not have worked because of excessive line noise on the phone (with filtered lines, of course). And it would have cost more than double what I was quoted by a salesperson.

Though relatively rare, my experience underscores how far DSL has to go before it can serve the mass market well. Chief among the issues facing DSL is distance. While providers have built DSL within a mile or two of their central offices for relatively little money, the next phase of growth will cost a lot more money per user. I was on the fringe of Qwest's range, which is why line noise was unbearable for me. As our cover story shows, SBC and Qwest are investing heavily in DSL access multiplexers, which will increase DSL's reach, at alarming costs. SBC's Project Pronto, for example, will cost the company an estimated $6 billion. It will take years for these investments to pay for themselves, and the payment will be in the form of higher rates for consumers.

Second, my experience makes it obvious that consolidation among the regional bell operating companies (RBOCs) has taken a toll on customer service. Mergers and acquisitions take time to work as parent companies restructure themselves to absorb the costs of acquisition. Restructuring usually means cost-cutting, which inevitably affects the help desk. The more DSL users the Baby Bells add, the more stress these help desks will endure.

Because I'm eager to improve the speed of my dial-up connection, I'm left with a choice of going with cable through AT&T Broadband or satellite through The Dish Network and StarBand or Hughes' DirecPC system.

Cable broadband just became available in my neighborhood in July. Though advertised speeds are more than adequate, I'm not sure I should go this route. It is pricier than DSL and, as more users in my neighborhood sign up, the performance I get will only diminish. Comcast's bid for AT&T Broadband, which was rejected by AT&T's board, shows that the industry is not done consolidating, with all the tech-support headaches that brings. And at the moment, I still won't be able to choose my ISP if I sign up for cable.

Satellite is reasonably fast (400Kbps) and price-competitive with cable, but it has two very big drawbacks. The first is latency. It takes roughly one second to communicate with geosynchronous satellites--a delay that badly messes up real-time communications such as two-way games, video conferencing, and Internet telephony. The second problem is weather, which can affect signals at critical times.

While my DSL experiences may not be the norm, my situation is. To wit, there is no good choice for broadband even though I live in the geographic center of the 13th-largest market in the country. And I don't see my options improving for at least a couple of years. What makes this decision tougher than many tech choices is what I call lock-in: If I purchase the equipment for any of these options, I am making a leap of faith that its problems will be resolved quickest and most economically. If another option wins, I'm stuck with useless gear. At the moment, cable seems in the best position to justify locking in, but it is still a rather large leap of faith.

The good news is that broadband will eventually get over its current slump and supply will catch up with demand. The better news is, more than mere faith leads me to believe that that my team will still be in the hunt for the playoffs when I look into the demand side next month. Great defense, good pitching, and timely hitting make me confident that the Twins will get over their current slump and be in it for the rest of the season. Stay tuned.