Year in review: Broadband goes mainstream

Residential broadband took off in earnest in the United States in 2003, as local phone carriers finally got serious about offering their customers high-speed Internet service.

Verizon Communications, SBC Communications, Qwest Communications International and BellSouth all moved to beef up their DSL (digital subscriber line) offerings and make them more attractive to customers through expanded service, price cuts and aggressive marketing. Those moves helped drive DSL growth and put pressure on cable broadband providers to respond with their own special deals and service improvements.

Broadband services added new subscribers at a brisk clip, with DSL growing more than 30 percent between January and September to some 8.2 million customers, according to Leichtman Research Group. For the same period, cable broadband grew just less than 30 percent to 14.5 million subscribers.

The clearest losers in the race to broadband for now appear to be dial-up Internet service providers such as America Online and Microsoft's MSN. Both services, the two largest dial-up services in the United States, witnessed a staggering drop in their subscriber rolls in the past year, with AOL losing 2 million members over a 12-month period.

The biggest winners have been consumers, who now have a choice between several broadband service providers in some major markets. But there is still considerable uncertainty over the future of broadband in the country, which lags global trends in bandwidth price and speed.

Meanwhile, the Bells won some significant concessions on broadband deregulation, when the Federal Communications Commission in August issued a long-awaited overhaul of telecommunications rules. But the new rules pleased almost no one and have been challenged in court.

Meanwhile, cable companies face a potentially crippling legal ruling in a federal appeals court proceeding that challenges FCC policies aimed at keeping the industry free of regulations that have been imposed on the telephone industry.

Regulatory issues aside, delaying broadband deployment has become increasingly untenable for the Bells in the face of growing competition from cable companies.

Phone and cable companies have until now been defined by the services they offer. But the distinctions are dropping away with the advent of high-speed digital networks, which are capable of running data, video and voice applications over the same line.

As a result, cable and phone companies are increasingly stepping on each other's turf, with cable companies rolling out voice products and phone companies exploring delivering television programming over DSL lines.

--Jim Hu