The Broadband Economy. by Karen Kornbluh. December 2001.

A resource crucial to the economic recovery of the United States is buried underground. Hundreds of thousands of miles of fiber-optic cable, which enables the fast, robust communication that was so important to the economic success of the last decade, currently lies unused, the digital equivalent of fallow farmland.

America needs to put this asset to work. Broadband - the generic term for high-speed, high-capacity, always-on data networks - is integral to the improvement of the American economy. To help businesses and consumers gain access to this technology, Congress and the administration must come up with a bold broadband strategy - and avoid the quick-fix solution that would rely on the powerful regional Bell telephone companies.

The story of broadband is one of arrested development. In the last decade, investors plowed $90 billion into the construction of a cross-continental fiber-optic broadband network. Today, a mere 3 percent of that backbone is in use. The other 97 percent remains dark because only 10 percent of homes and smaller businesses are connected to it. The rest await access but have been frustrated by the cost and difficulty of upgrading the local telephone networks, which are still owned by the Baby Bells - Verizon, SBC, Bellsouth and Qwest - left from the 1984 breakup of AT&T.

The deployment of broadband, along with the Telecommunications Act of 1996 and the commercialization of the Internet, helped fuel the economic boom of the 1990's. Investors not only financed companies that built the long-distance fiber network; they also created dozens of new companies dedicated to delivering broadband to homes and smaller businesses. Large businesses built their own dedicated data connections and used them to improve efficiency in inventory control, purchasing, sales and manufacturing processes.

But then the information revolution stalled. What the entrepreneurs failed to foresee was the enormous difficulty and cost of upgrading the last mile - copper telephone wires that connect individual homes and small businesses to the broadband backbone.

Laying a second line to these customers can cost $1,500 per customer. But under the law, these new broadband start-up companies had another option: they could install their own equipment in existing Bell offices, allowing existing copper wires to handle more traffic, for example. When they tried to, however, they often encountered logistical obstacles.

Today, many of the new broadband competitors are out of business, leaving the incumbent Bells - and in some areas the cable companies - as the dominant broadband providers. Broadband prices, which had dropped with the advent of competition, are up, and deployment has slowed.

Without broadband, small businesses are unable to boost productivity the way their larger counterparts did in the late 1990's. Nor will Silicon Valley be able to reach a critical mass of customers for its newest applications - from online doctor visits to high-quality video conferencing and interactive television. Without mass access to broadband, businesses of all sizes will not want to invest in a host of productivity-enhancing technologies.

The House leadership is planning to bring legislation to the floor, before the holiday recess, that would speed up broadband deployment. But the bill is not nearly bold enough. The proposed legislation would relax rules that require the four Baby Bells to share access to their telephone networks with broadband competitors.

Its supporters claim that with the proper incentive, the monopolies will deploy the new technologies themselves. But most of the recent investment and innovation in data networks occurred only when the network was opened to competitors - as it was in the long-distance telephone market in the late 1980's.

The government needs to play a far greater role, just as it did with the construction and support of other infrastructure: railroads, electricity, telephone service, highways and the Internet. Each was more expensive than the private sector could have managed on its own, but the benefits to the nation were great.

The administration should articulate a national goal of universal broadband access - just like the goals we had for universal electrification and phone service. And if the cost of deploying broadband connections in some areas is more than consumers can pay, the answer is for the government to provide a subsidy - targeted at sparsely populated regions of the country, at low-income users, or both.

Both Congress and the president should realize that an ambitious broadband strategy can help revitalize the economy. The broadband network - the infrastructure of the 21st century - lies beneath our feet. A good economic stimulus plan would start the process of bringing this resource to the surface.

Karen Kornbluh is a fellow at the New America Foundation and former deputy chief of staff in the Treasury Department.

A version of this article was published in the New York Times on December 10, 2001.