Bandwidth boom to bust flat-rate Net

Sidgmore spoke at the Business Week Conference of the Digital Economy, painting a picture of a telecommunications industry that has only barely begun its complete transformation. The rise of the Internet will soon make voice traffic a "niche" player in the industry, he said.

But the boom in data traffic may force a change in the way consumers and businesses buy Internet access.

"We've got a very big expectations problem coming," Sidgmore said. "The world believes that Internet access should be cheap, and that broadband access should be a part of this. The problem is, that doesn't work very well."

The dilemma stems from a kind of Moore's Law of the Internet, Sidgmore said. Demand for backbone bandwidth is climbing at a rate of about 1,000 percent per year. To date, that largely has been driven by new Internet subscribers. But high-speed access like DSL and cable modems will make video and other bandwidth-hogging applications possible, putting even more pressure on networks, he said.

MCI WorldCom and other backbone providers are quickly laying fiber to keep up, prompting some analysts to talk of bandwidth gluts. But even these efforts will be hard-pressed to keep up with demand that grows by ten times a year, Sidgmore said.

The crunch is already biting into some high-bandwidth providers. Cable service @Home recently imposed ten-minute limits on its customers' downloads of broadcast-quality video, saying that the heavy data streams might otherwise overload the portion of the cable being used for Internet access.

A few technological options might take the load off networks, Sidgmore said. Caching alternatives, where commonly used pages and applications were mirrored at local sites, would reduce the use of long-haul networks. New technologies also are being developed that use fiber-optic cable more efficiently.

Long distance Internet pricing?
But pricing schemes might have to pick up where technology leaves off, Sidgmore added. One way to do this might be to charge bandwidth-hogging users more by the byte, or charge long distance-style fees for access to sites that are overseas or in other hard-to-reach areas, he said.

"The more likely scenario if bifurcation takes place is if you have a 28.8 modem there will be no restrictions," Sidgmore said. "But if you have a 2 megabit or 4 megabit modem, we might restrict where you go, based on price." Carrying traffic halfway across the world is more expensive for providers because of the cost of laying cable undersea or in other remote areas, he added.

Data traffic carriers will have to start looking into some way around the crunch--be it caching options or other alternatives--as soon as 9 to 12 months from now, when digital subscriber line (DSL) service becomes much more common, he said.

MCI WorldCom itself is in the middle of a rollout of DSL services across the country, and is scheduled to have 600 points of presence by March 1999.

The notion of long distance pricing is a radical one for an Internet industry that has been built on the $19.95 monthly fee. But analysts say Net pricing will need to change as the medium evolves.

"Internet pricing is kind of bizarre," said telecommunications analyst Scott Cleland of the Legg Mason Precursor group. "Data pricing in the telcos is a legacy of the voice regulation area. Right now bandwidth is massively subsidized."

But any move away from flat-rate pricing would have to be made very carefully by providers, he noted. Consumers and business would likely use services less, which could slow the development across the Internet industry.

"Europeans charge by the minute, and they're way behind the United States," Cleland said. "Draw whatever conclusion from that you want."

Sidgmore did say that MCI WorldCom would only go to a long-distance style or bit-rate pricing structure as a last resort, if caching or other technological solutions failed to take pressure off networks.

"That would be a counter-cultural nightmare on the Internet," he said.