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DSL is the world's most popular broadband technology today. According to Steve Rago, principal analyst of market research firm iSuppli, DSL takes a whopping 71% share of the worldwide market. It's number one in Asia, Europe, and most of the rest of the world. But in the U.S., cable TV rules broadband. Over 75% of U.S. homes have cable TV, making broadband a natural extension to the cable companies' services.

However, a Government Accountability Office report last year said that only 58% of U.S. households had Internet access, with 30% using dialup and 28% using broadband access. That falls way below the rest of the world. Part of the problem is that vast geographic areas are underserved because it isn't profitable to provision such sparsely populated areas. And that's not the case in high-density Asia and Europe or medium to large U.S. cities.

Cable TV was first with broadband service in the U.S. in the late 1990s and early 2000s. With speeds of about 2 Mbits/s, it was expensive. Some early incumbent local exchange carriers (ILECs) set up to deliver DSL, but growth was slow since most users were too far away from a central office for a DSL connection to work. SBC, now AT&T and Verizon, finally put DSLAMs in neighborhoods, offering DSL to a whole new customer base.

Over the years, DSL prices have declined thanks to new enabling technology and the battle with the cable TV companies. The initial basic ADSL service, which offered a maximum of 1.5-Mbit/s download and 384-kHz upload speeds, is slowly giving way to 3-Mbit/s download service and more. Anything over about 1.5 Mbits/s almost isn't noticeable on e-mail and searches, but you may have to wait a few seconds if you're constantly downloading video, music, or large digital photo files.

Thanks to upgrades in delivery technology and aggressive pricing, DSL growth rates ranged from 15% to 20% over the past few years, greatly exceeding cable-connection growth rates. As a result, DSL has almost caught up to cable in number of subscribers. Some predicted that DSL would pass cable in 2006, but it didn't happen.

Rago says that in 2006, cable led with about 50% of the U.S. market, while DSL captured about 47%. That figure is changing minute by minute, though, with a DSL/cable split of about 48%/49% expected this year. As the technology improves and pricing gets more competitive, DSL could eventually pass cable. Well, maybe...

Cable companies are fighting back by adopting the new Cable Labs DOCSIS 3.0 system, which greatly upgrades their equipment to bond adjacent channels and offers up to 100-Mbit/s service. OpenCable's new OpenCable Applications Platform (OCAP) operating-system-like software is expected to eventually upgrade set-top boxes (STBs). It also should provide a standard that will mitigate the many differences that exist now from one STB to another and from one cable system to another. Video will be better than ever, but it will take time and most likely will be more expensive.

While cable remains competitive, DSL vendors (mostly AT&T and Verizon) are hell-bent to improve DSL so that it can participate in the forthcoming triple play of Internet service, VoIP, and IPTV. Many cable TV companies have offered VoIP for years, versus just the few DSL companies that make it available. Nonetheless, it is coming. So is IPTV.

With traditional POTS wireline subscriptions slowly declining, main telephone carriers must move in this direction to maintain growth and profitability. But that means expensive capital-intensive and aggressive technology upgrades to DSL systems, which is finally starting to happen.

The Wall Street Journal editorial of February 15 presented a good summary of where the U.S. broadband business stands today. Thanks to the deregulatory policies of current FCC chair Kevin Martin and his predecessor Michael Powell, the telecom industry has never been healthier.

At a Senate hearing in February, Martin said, "In 2006, the S&P 500 telecommunication sector was the strongest performing section, up 32% over the previous year. Markets and companies are investing again, job creation in the industry is high, and in almost all cases, vigorous competition resulting from free-market deregulatory policies has provided the consumer with more, better, and cheaper services to choose from."

The WSJ editorial explained that most of the growth derived from increased broadband deployment. Broadband connections went up by 26% in the first six months of 2006 and by 52% for the full year ending June 2006. Of the 11 million new broadband additions in the first half of 2006, 15% were cable modems, 23% were DSL modems, and 58% were some form of wireless. But the real scary point is that such good news could come to an end thanks to an aggressive new Congress eager to steer telecom regulation in a different direction.

Just as the industry has recovered, we could see the free-market approach die in favor of heavier regulation. Senator Byron Dorgan, Representative Ed Markey, and some other members of the "net neutrality" crowd are planning hearings that could lead to some heavy-handed new regulations. Such regulations could lead to consumers paying more for fewer choices in the future. And any new policies may dash the hopes of or delay any IPTV deployment—just when things were going so well.