RealTime IT News

In Search Of More Broadband Customers

The jury's out, though everyone seems to have an opinion, on the reason for mainstream America's reluctance to embrace high-speed Internet service.

While the number of digital subscriber line (DSL) and cable Internet users is still rising, subscribers still only make up 10 percent of online America. The reason for the hesitancy may come down to two main sticking points: content and pricing/availability.

Incumbent carriers around the U.S. are signing deals with content providers in the hopes of spurring interest in broadband in mainstream America, hoping that a familiar and friendly site will bring them online.

Both Verizon Communications and SBC Communications have hitched their stars to major Web portals in recent months.

Last week, Verizon penned a deal with MSN to provide a co-branded DSL service dubbed "Verizon Online with MSN," covering 34 million homes across its backbone footprint. Back in April, SBC signed a more far-reaching agreement with Yahoo! to bring the popular Web portal's visitors into the broadband fold.

Both deals are a boon for the content providers involved: MSN has been looking for a DSL offering after its investment in NorthPoint Communications went south, and Yahoo! gets an alternate revenue stream for every subscriber it brings to SBC.

Dr. Yardena Rand, research director at Sage Research, said a case can be made for content dictating broadband appeal, and content providers like MSN going to a regional carrier for a deal, as opposed to a national carrier like Covad Communications .

"Dial up users really have to be convinced to pay more for their broadband connection, so it's going to have to be content driven," she said. "It's always easier to make a deal with someone who has a large footprint to get you wider coverage, but let's be honest, it can be a bit risky. I wouldn't be surprised to see more of these deals in the future."

So is content the only reason people haven't been signing up by the thousands the past couple years? Is the inevitable crush of broadband signups imminent? Not so, according to Daryl Schoolar, an Internet service provider (ISP) analyst at Cahner's Instat.

You need only look at [former] cable broadband provider Excite@Home for the answer. The popular cable ISP, a coalition of some of America's cable networks, had millions of customers. When its financial problems came home to roost, the Excite content side was sold off and still made money.

"A good analogy is looking at Excite@Home and the breakup there and the service being broken up among the cable guys," Schoolar said. "You still had growth, even without Excite -- all Excite brought was the content; even without the content their cable modem service still continued to grow."

Meanwhile, Covad is betting that is pricing and availability, not content, that will bring new customers its way. will bring in new subscribers. Last week, Covad reduced its monthly asynchronous DSL (ADSL) fee to $39.95, on the heels of an ARS Inc., research report that shows U.S. monthly DSL rates climbed to an average of $51.82 in March 2002.

Martha Sessums, Covad spokesperson, said content is well and good, and she wishes her competition the best of luck, but expects her company's DSL price drop will be more successful.

"A drop in pricing will spur demand and if others can spur it through content, then that's fine," she said. "But content isn't the issue, it's pricing and availability."

But the real issue of broadband adoption and migration isn't strictly in better pricing or better content, says Ken Zita, president of Network Dynamics Associates LLC, and a member of the Pacific Telecommunications Council board of trustees. It's a little of both.

Zita believes the media and Wall Street hype surrounding the advent of broadband Internet gave consumers "impossible expectations" of its benefits. The reality, he said, is that many still consider broadband a luxury item and not a necessity.

That will change and a revolution will come, Zita said, when business and residential use becomes more ubiquitous.

Operational support systems and middleware -- the humdrum back-office technology that makes complexity simple -- will prove to be the engine for generating and managing new broadband services," he said. "The need for these services will be determined by actual changes in how we live and think and not by myths fabricated for the market."

Driving the back-office technology to the home will be the rising number of telecommuters who want intranet-like speeds while at home, regardless of the price. It's part of the "Incremental Revolution That Will Be," Zita said.

"Even those in corporate jobs are establishing more balanced lives by linking into company resources from home," Zita said. "Broadband access makes the process more effective and, in some sense, more satisfying."