The confluence of two forces—the globalization of business and the networking of information technology (IT)—has created the Internet economy. Electronic commerce and technology industries are growing and changing the economy of the United States and much of the rest of the world at breathtaking speeds. Today's economic shifts are having a more profound impact on the lives of individuals than did the Industrial Revolution. Innovation and productivity gains are valued above all else in this new economy. By leveling the playing field for everyone, advances in telecommunications and data technology are creating new opportunities for businesses, countries, and individuals—just as the Industrial Revolution changed fortunes around the globe. The new economy is defining how people do business, communicate, shop, have fun, learn, and live on a global basis—connecting everyone to everything.

As Former Vice President Al Gore stated, "We are in a new economy—an economy driven by information, research, knowledge, and technology." Alan Greenspan, Chairman of the Federal Reserve, echoed these comments when he stated that a "significant segment of our economy's growth reflects output of high-tech equipment." According to Greenspan, it is only a matter of time before the Internet becomes the prime venue for the trillions of dollars of business-to-business (B2B) commerce conducted each year. "Virtually every part of our economic structure is, to a greater or lesser extent, affected by the newer innovations in computers and in telecommunications....With few exceptions, little of a truly old economy is left. In the past five years, the long-term prospective profit growth of companies engaged in the computer and telecom industry have been revised up by more than double the amount as the profits earned by old economy-aligned industries."

Technological innovation and, in particular, the spread of IT has revolutionized the conduct of business over the past 10 years and has resulted in large increases in productivity. The surge during the past few years in business capital spending is a direct result of the higher rates of return brought about by the application of new technologies. The pace of innovation may have slowed down temporarily, but it is expected to resume as soon as companies begin to exploit the largely untapped potential for e-commerce, especially in the B2B section, from where much of the growth is expected to come.

The increasing importance of the Internet has brought about dramatic changes in the way goods and services are produced and distributed to end users. The Internet continues to play a significant role in shaping the new economy by enabling firms to communicate and conduct business on a global basis without regard for location or asset size. Investment in high technology continues to serve as an engine of strong productivity growth for the U.S. economy. Alan Greenspan expects this trend to continue in the years ahead. Moreover, the increasing penetration of broadband access among business and consumer users significantly augments this trend. This transformation from the old economy to the new economy will quicken in the coming years with the pace of innovation. Electronic marketplaces that automatically solicit bids from suppliers have the potential to reduce transaction costs substantially for companies and for the economy as a whole. Already, major efforts are under way in the automotive industry to move purchasing operations to the Internet. Similar developments are planned or are in operation in many other sectors and industries as well.

As the Internet market continues to explode, the demand for greater bandwidth and faster connection speeds has led to several technological approaches developed to provide broadband access to all consumers. Former Federal Communications Commission (FCC) Commissioner Kennard stated, "The most important issue on our agenda today is broadband....Broadband is going to change America....We want four things for consumers in the broadband world. We want fast deployment. We want ubiquitous deployment. We want competitive deployment. And we want open deployment." Ubiquitous broadband access to the Internet is an essential ingredient needed to gain the most out of what the Internet has to offer.

Broadband access is one of the most important issues for telecom equipment manufacturers and content and technology providers, as well as for cable operators, satellite providers, and fixed wireless operators. Any operator that fails to announce and implement a broadband strategy, including providers serving rural communities, will suffer consumer defections and a decline in retention rates for both business and residential customers. The pervasive influence of the Internet and the introduction of many Internet-ready appliances have fueled demand for broadband access.

The Evolution of Broadband examines the forces driving the rapid growth of broadband and high-speed access to U.S. homes and businesses. Broadband access is not only about providing the pipes to carry traffic on the Internet, but also about how that traffic will be carried. The report will raise numerous questions regarding partnerships, such as the following:

• What role will partnerships play in this new type of Internet environment?
• Will sites be more responsive to consumers who come from one of their partner sites?
• How will the formation of partnerships around content and infrastructure affect consumer behavior, a site's responsiveness, and any additional or custom features available?

These are just some of the questions that need to be asked and answered to provide clues to the future of broadband access and content delivery. Some of these questions were posed to a panel of experts that the International Engineering Consortium (IEC) had convened and were included on the broadband access surveys that were distributed at several IEC conferences throughout the year.

In only a few short years, all Internet appliances or electronic devices will be able to access the Internet and obtain the same content as personal computers (PC). Advances in technology and the needs of e-commerce are driving the Internet economy. Technology drivers include the integration of voice, data, and video on a single network as the traditional voice and data networks converge. Internet technology has become mainstream and is a requirement for companies interested in competing in today's global business world.

According to Alan Greenspan, the extent of the application of existing technology is far from complete. Greenspan predicts that total productivity growth rates will continue to remain high and are likely to increase further, despite the uncertainty in the markets about the pace of future productivity growth. The United States will continue to have increased productivity because despite the surge in demand, cost increases have been held in check. Moreover, Greenspan states that as "knowledge is irreversible, so much—if not most—of the recent gains in productivity appear permanent." Higher levels of productivity growth affect the demand for goods and services. A more rapid pace of technological change makes investments in capital goods that use these new technologies more profitable. As businesses recognize the new technological possibilities open to them, capital spending is increased to take advantage of these new opportunities. The higher level of business spending on capital goods results in increased employment and higher income, and also leads directly to a boost in consumer spending, setting off another round of investment spending. These higher-productivity growth rates translate into higher real income growth for employees and leads to higher consumer spending, raising aggregate demand. This rise in aggregate demand results in higher purchasing of goods and services, such as broadband access.