RealTime IT News

Cable Widens Lead In High-Speed Race

Less than six years after passage of the Telecommunications Act of 1996, digital subscriber line (DSL) coverage nationwide is floundering while cable lives up to deployment expectations, according to numbers in a Yankee Group report released Thursday.

The report, "Residential Broadband: Provisioning Cable Modem Service," predicts 75 percent of all homes in the U.S. will support a broadband connection, be it DSL or cable Internet, by year's end. Numbers were not available for other broadband options like fixed wireless or satellite service.

Broadband providers, as an industry, have been swift to ramp up their deployment schedules to meet the anticipated demand for high-speed Internet access, a strategy that's a net gain of 15 percent over last year's broadband footprint.

Michael Goodman, author of the report and a senior analyst at the Yankee Group, said the next step for network owners is to get paying customers lined up to the service and make provisioning less expensive.

He said cable operators spend an average of $360 per customer installing equipment and getting the customer online. With more self-installs and better technician training, he said, cable companies will be to increase their efficiency.

"Building out the network to make broadband available is only half the battle," Goodman said. "Success will increasingly be driven by the network operators' ability to lower the cost of hooking up individual households for broadband service.

Mike Luftman, a spokesperson for the second-largest cable network in the country, Time Warner Cable, said that the AOL Time Warner subsidiary has taken steps to ensure their high-speed Internet service compares favorably over DSL.

He said AOL/TW has three selling points that have brought in large numbers of broadband wannabes. They are:

  • Using networks that have been completely upgraded, so that when service becomes available in an area, every home passed by upgraded cable can sign up for the service immediately, with no weeks-long wait to see if the line is qualified for service as with DSL;
  • Offering higher speeds at a lower price than DSL. Road Runner is $44.95 per month for a service with 1.5 mps downstream and 750 kps upstream. In many cases DSL's cheapest service is several dollars more, yet offers lower speed; and
  • Not forcing people to sign one-year contracts, offering to simply disconnect service at no cost after 30 day.

The one figure in the report that should have many worried is the fact that only 45 percent of the houses passed by the end of 2001 will feature DSL, an alarming fact when you consider the growing popularity of high-speed Internet access and its intense competition with cable operators for broadband subscribers.

This apparent slowdown in the DSL industry could have a negative impact on the entire Internet service provider (ISP) industry.

Competition between providers keeps pricing down and prevents many from getting away with extravagant service flaws, a checks-and-balances act between cable and DSL that has been the benchmark of Federal Communications Commission Chairman Michael Powell's policy in the telecommunications industry.

Cable operators, meanwhile, have been busily upgrading their networks to meet the demand for broadband, passing 66 percent of the houses in the U.S. and showing no signs of slowing down.

At this rate, they will blanket the country long before DSL makes significant headway, especially as telephone companies slow down deployment in the less-populated Tier 2 and 3 markets (populations under 100,000, generally speaking).

Regional Bell operating centers (RBOCs) around the country have backed down lately from promises to provide widespread DSL availability, cutting back deployment and calling for a revision to regulatory constraints they say hinder their broadband deployment.

SBC Communications , which had promised to provide 80 percent of its telephone customers with DSL by 2002 as part of its arrangement to acquire rival Ameritech, has approximately 1.2 million DSL customers, but plans on slowing down its Project Pronto deployment. Officials have already pushed the deadline for its first phase back to 2003 and have effectively halted future plans for the second phase.

Qwest Communications , Verizon Communications and BellSouth have also slowed down their deployment in less populated areas of their operations, saying it's too expensive to deployment equipment in relatively underserved areas. All three have experienced revenue losses in the in the recently closed third quarter, prompting their slowdown.

One analysis outfit says the timing couldn't be worse for a DSL slowdown.

Cahner's Instat, predicts that the number of broadband subscribers, which hovers at a little under 21 million customers nationwide, will exceed 84 million in the next four years. But if DSL doesn't make headway soon, analysts say, cable could walk away with a lion's share of that number.

Instat findings also concur with Goodman's report, finding cable will outnumber DSL for the foreseeable future.

Luftman is quick to point out that DSL isn't out of the picture yet, so cable needs to take advantage of the current lead.

"DSL should not be discounted as a competitor," Luftman said. "The RBOCs do have very deep pockets. Even if they have slowed DSL deployment, it is no doubt temporary. In the meantime, we will grow the cable modem business as quickly as we can."