Broadband and Main

A determined Illinois town brings speedy Net access home

Cleathe Palmer's three-bedroom bungalow in Evanston, Ill., would spark envy in countless neighborhoods across the country. Not because it has more bedrooms than anybody else's, or the biggest yard. It's the wiring. The 35-year-old software developer has wired three computers together with a digital subscriber line (DSL) to the Internet that zips online at a sizzling 635 kilobits per second, some 11 times faster than most dial-up modems. "Yeah, it hums," Palmer says.

Spend one day with the Palmer family, and you see how that speed changes their lives. Nine-year-old Taurean downloads a feature-length film of the Japanese action cartoon Dragon Ball Z in less than an hour--something that would have taken all afternoon with a dial-up modem. Cleathe provides tech support for companies scattered around the world from his living-room recliner. And once a week, he watches Monday Night Football on his PC's 17-inch monitor--with extra features that few football fans can fathom. When the Green Bay Packers score against the Denver Broncos, an image of Donald Driver's touchdown catch pops up, displaying his stats and history. There's even a chat room where Palmer can win points by predicting what the next play will be. "If you have a high-speed connection," he boasts, "you get the goods--all the bells and whistles."

Evanston is chock-full of households like Palmer's. In this leafy, picturesque town on the shores of Lake Michigan just north of Chicago, 15% of the 33,000 households have broadband connections to the Net, compared with 6% in the rest of the country. A tour through its main street of small businesses, nearby Northwestern University, and the surrounding homes offers a glimpse into the future of broadband in America. This is no Silicon Valley with technologies that only geeks could love. What one finds in Evanston are the practical, simple, easy-to-use broadband applications that are likely to have appeal across the country.

What does the future look like? Families such as the Palmers watch videos, even TV shows, on their computers. Palmer's wife, Sheilece, zaps video e-mails to her brother in Orlando. Evanston teenagers, including Matthew Bell, 18, play action games online in real time against competitors living in cities as far away as San Francisco and Stockholm.

And business owners can run their operations more efficiently than before. Graphic designer Morris "Dino" Robinson Jr. could never afford the $1,000 a month for the high-speed T-1 line that phone companies used to offer. But his one-person outfit, Robinson Design, picked up a DSL broadband link in 1999 for a mere $50 a month. Now, Robinson Design routinely zaps logos and other art to customers in 2-gigabyte files, bigger than the entire hard drive of many PCs. In the past, the firm had to send designs by courier or overnight mail to get customers' approval. "Now that I have broadband, I don't know how I could get along without it," says Robinson.

DISPARITIES. But Evanston also shows that the broadband future will be far short of Net nirvana. First off, it's not easy to get there. The town's leaders trudged up a long, tortuous path simply to make speedy Net links available. Worse, the market here has become something of a duopoly after the telecom industry meltdown drove many upstarts into bankruptcy--a disturbing development that is being repeated across the country. Without aggressive competition, the two companies that dominate the Evanston market, AT&T (T ) and the Ameritech division of SBC Communications Inc. (SBC ), hiked prices 25%, to $50 a month, this year. What's more, service is irksome: Customers can wait months for installation, and they often require more than one visit from a technician to work out all the kinks. Even then, customers complain that their broadband links crash as often as twice a week. "It's not exactly simple plug-and-play," says Louis Bell, a lawyer who has DSL service in his Evanston home.

More unsettling, the community's experience shows that the move to broadband threatens to widen the digital divide between rich and poor. While 43% of the U.S. population has some kind of Net access today, the figure is only 11% for households with incomes under $15,000--like many on Evanston's west side. In Evanston's low-income, predominantly African-American neighborhoods, broadband penetration is nearly zero, while it's about 20% in wealthier neighborhoods. A $50 monthly broadband bill is an impossible luxury for the poor. "Most people with computers can get on anytime they want," says 15-year-old Annette Taylor, who doesn't have Net access at home. "I can't."

Despite the frustrations, Evanston has much to teach the rest of the country. The town's experience shows that broadband can make a big difference in the way the Internet enriches people's lives at work and at home. But the transition to speedy Net connections doesn't happen easily or quickly. It takes a concerted, community-wide effort with cooperation from businesses and residents.

Evanston's journey began in 1999 when the townspeople created a nonprofit organization, e-Tropolis Evanston. The goal: getting broadband service to every citizen and every business. Northwestern played a key role by providing office space, technical advisers, and money for the cause. Businesses and residents also kicked in cash. Now, e-Tropolis encourages broadband carriers to enter the market and subsidizes service for certain Evanstonians, particularly low-income residents. For example, e-Tropolis persuaded AT&T Broadband to extend its network so a local community center could have Net access--and e-Tropolis picks up the tab. "We're helping to accomplish their for-profit business objectives by reaching new areas of the community, and they're helping us get our community connected," says Charles R. Smith, executive director of e-Tropolis.

Why has Evanston become a window into the future of the Net? With about 75,000 residents in an eight-square-mile area, the town has a strong community spirit. Over the years, it has fought off at least three annexation attempts by Chicago. In the 1990s, town leaders were frustrated that Evanston was becoming a bedroom community for Chicago. They wanted to foster local businesses, especially tech companies.

Led by the likes of Ronald C. Kysiak, the executive director of a local economic development organization called Evanston Inventure, community leaders set out to build the communications infrastructure to attract tech companies. The idea was to turn Evanston into a thriving "Technopolis," replete with wired homes and virtual marketplaces. At first, he tried to raise private funds to extend Northwestern's fiber-optic network to the city's commercial buildings. That effort failed, but the task force Kysiak established evolved into e-Tropolis Evanston.

The ride toward a fully connected community has been as choppy as Lake Michigan on a windy fall day. After its formation in 1999, e-Tropolis started working with aggressive upstarts NorthPoint Communications (NPNTQ ) and Phoenix Networks, which provide broadband with DSL technology. They were eager to get a toehold in the Chicago market and worked out a plan with e-Tropolis to sell discounted broadband in Evanston. But the sputtering U.S. economy and the subsequent tailspin of the telecom industry drove NorthPoint into bankruptcy earlier this year, and Phoenix into the arms of an acquirer. Both backed out of the plans to sell discounted service and cut off service to some customers.

BIG HELP. The miscue soured some people on broadband. When Phoenix ran into trouble, "all of a sudden our computer screens went blank," says Thomas Erd, owner of retailer The Spice House. "Customers were left stranded." He signed up with another broadband provider, but they shut down, too. "I'm thoroughly disgusted with these services. They set you up, and then they disappear," he says.

Despite the turmoil in the telecom industry, the town didn't give up. In the spring, e-Tropolis started working with bigger companies, including AT&T and Ameritech, that had the cash to keep rolling out service. The nonprofit group markets their services in advertisements on the e-Tropolis Web sites and lets residents take test runs at three community tech centers. The e-Tropolis effort, which has cost a total of $500,000 so far, is paying off. AT&T has invested enough in its cable-television network in Evanston that it can offer broadband service to every house and many businesses in town, something it can't do throughout Chicago. Regional telephone operator Ameritech can offer DSL to about half of the homes and businesses in town. Sprint Corp., under Chicago General Manager Pam Parma, has even started offering broadband with a new technology called fixed wireless.

Evanston provides insight into why cable companies such as AT&T are beating out the phone companies in broadband battles across the country. In Evanston, Ameritech has roughly 15% of the broadband market while AT&T has about 85%. The biggest reason is availability. Consider the case of Michael Coxhead, a technology consultant. He tried to get DSL service from Ameritech for more than a year, calling every six weeks only to be told the service wasn't available yet. "It was always imminent," he says. In July, he called AT&T and got the speedy data service installed in two weeks.

That pattern is being repeated across the country: There are about 5 million cable-modem subscribers and fewer than 3 million DSL subscribers, according to Goldman, Sachs & Co. (GS ). And that gap is unlikely to close, since cable companies are installing 6 out of 10 new broadband links in the U.S. Why aren't the phone companies more aggressive? Analysts think they aren't willing to make heavy investments in the short term--and cut into earnings--even if it means long-term growth. "The most important reason for the slower pace, we believe, is the desire of the telcos to control [profit] dilution from DSL," says analyst Frank J. Governali of Goldman Sachs. "We view this as a long-term problem for telcos." SBC says the only reason it has held up broadband is regulatory hurdles.

There are other factors at work. There's more strategic value for cable companies to upgrade their networks: Once AT&T invests in its cable network, it can sell phone service over it, as well as digital TV and broadband. The only additional service Ameritech can sell is broadband. Plus, it's cheaper for cable companies to provide broadband: It typically costs about $300 per household to install broadband, compared with about $500 for phone companies.

Whoever provides it, broadband is beginning to change the way people live. Just peek inside the Palmer house. Palmer has four children, ranging in age from 6 to 13. Since he ordered DSL from Ameritech in February, 2000, each family member has been less frustrated and more productive. Before, one phone line handled the house's voice service, plus Net connections for three PCs. Family members battled one another for time online, not to mention the opportunity to make an uninterrupted phone call. With DSL, the phone is free for calls while the computers share a connection to the Internet that is always on. The kids can play educational games on the Net while dad logs into his company's network and mom makes a long-distance call. "It has really freed up the family to do a lot more at the same time," Palmer says.

MOVIES, MESSAGES, GAMES. One clear result of getting broadband is that people spend more time online. Each broadband user spends an average of more than 21 hours a week online, 35% more than the 16 hours Web surfers spend with dial-up modems, according to a joint study by consultant McKinsey & Co. and investment bank J.P. Morgan Chase & Co. (JPM ). Look no further than Matthew Bell, whose family got a DSL connection from Ameritech a year ago. After school, he spends all afternoon hunkered over the computer in his upstairs bedroom and, after a quick break for dinner, goes right back online. On one typical afternoon, he's on his computer, watching the movie Alien in one window, instant-messaging with friends in a second, and playing an online game in a third. "Those types of things you can do a lot because of the bandwidth," he says.

High-speed Internet access also is changing Evanston's companies. At a recent meeting of local business owners at the Blind Faith Cafe, a vegetarian restaurant on Dempster Street, all the chatter was about the Net and the possibilities of e-commerce. The companies started a Web site called in 1999. Now, with their own affordable broadband links, businesses can link up to the town's site and sell to customers around the world. "When we started the Web site two years ago, it was an Alice-in-Wonderland thing. Now, it's more a fact of life," says Paul Giddings, owner of art shop Folkworks Gallery.

Not for everyone. In Evanston's poorest neighborhoods, Net connections are rare and broadband links are virtually nonexistent. E-Tropolis' Smith has a mandate from the city to use his group to try to close this digital divide. The notion is that Evanston will never become a New Economy center with thriving tech businesses if its workforce isn't proficient on the Net.

The initiative is taking root out of the grandly named Southeast Evanston Recreation Education Center--in reality, a trailer with several Internet links. Scores of African American kids visit the center to check out the Net. Few of them have PCs, and not one has an Internet connection at home. "I found out all the cool stuff you can do," says Olivia Lane, a 12-year-old seventh grader. She loves the chat rooms, but she's also intrigued by news reports on MSN.

Still, in Evanston, local boosters aren't making grand predictions about broadband's possibilities. They know firsthand how difficult the path to a speedy Internet can be. "It will take 10 years to see if we're successful in this," says Kysiak, the e-Tropolis visionary. In the meantime, the rest of the country can catch a glimpse of the broadband ups and downs headed their way.

By Roger O. Crockett in Evanston, Ill.

    Before it's here, it's on the Bloomberg Terminal.