RealTime IT News

Cable Execs Learning Lessons The Hard Way

[Author's Note: The following exchange is fiction. Any similarities to cable executives, living or dead, are purely coincidental.]

Cable Executive #1: Man, it stinks that @Home is getting profits for ISP service on our cable network.

Cable Executive #2: I know, let's get out of our contracts and start up our own ISP service!

Cable Executive #1: Capital idea -- it can't be all that difficult, right?

As many cable companies are finding out today, it is that difficult, and the results are rising cable costs, intermittent outages and slow throughputs throughout the country.

So goes the @Home migration fiasco as the major and minor cable companies formerly attached to the failing broadband ISP transition their service to their own homegrown networks networks that in some cases became ISPs overnight.

As such, prices have increased at the cable companies over the past year, and are sure to rise as network technicians work to get their networks stabilized throughout the country and still keep profit margins to appease investors.

Service and e-mail service outages in areas around the country have consumers howling. While some migrations, like Cox Communications customers in the Oklahoma City region, have gone without a hitch, some have not. Virginia Cox@Home users complain their service has been out for four days and officials are unable to give them a date when the service will come back online.

Cox officials have been planning a move from @Home long before announcing the end of their contract, but were caught flat-footed with the Feb. 28 shutdown date set by @Home creditors. Since then, they've been adding routers and services at a feverish pace to make the deadline.

Susan Leepson, Cox spokesperson, said they were expecting a leisurely migration process to culminate in June, when their contract with @Home expired. Recent events have changed those idyllic plans.

"We were working towards having a nice, slow transition period where we would transition in one market and take the key learnings from that and use them in other markets," she said. "Unfortunately, we have a more compressed time frame now and are trying to catch all the key learnings as we can and using them as we go. It's hard when you do this in a compressed time frame."

Cox had roughly 555,000 customers signed up through their Cox@Home service. Of that, Leepson said, 300,000 have successfully migrated to their own service, the rest will be moved over by the Feb. 28 deadline.

It's a similar story over at Comcast .

Jenni Moyer, Comcast spokesperson, said that overall the migration has gone smoothly, considering the timeframe they're working in, with only scattered problems in their service areas. She said two-thirds of their 950,000 customers have already made the switch from Comcast@Home to their network and expects the rest to migrate in early February, well before the deadline.

"We're clearly making adjustments in areas as needed," she said. "This is an extremely complex, singular event and we certainly expected to encounter some issues particularly early on in the transition because we were working under such an accelerated timeframe imposed by the (@Home) board."

So who's to blame for this mess? Obviously, something went horribly wrong and despite the best efforts of network operators to ensure an orderly transition, you can't escape the fact that for a while there, the fate of millions of connections were up in the air.

At one time, @Home was the most popular broadband ISP in the nation, with a following of 3.7 million high-speed junkies spread throughout the various cable networks in the U.S. Led by AT&T Broadband , Comcast and Cox, the company seemed invulnerable.

That is, until Jan. 19, 1999, when misguided executives bought up portal site Excite.com for $6.7 billion in a stock swap. While the acquisition seemed like a good deal on paper, matching eyeballs to customers to advertisers, the merged company quickly sunk into debt.

Panic reached a head when Comcast and Cox, the third- and fifth-largest (respectively) cable networks in the U.S., decided to strike out on their own after the expiration of their current contract on June 4, 2002.

AT&T Broadband, with Ma Bell executives sitting on the Excite@Home board of directors, didn't help matters by later placing a $307 million bid on the ISP side of Excite@Home. They later backed off, citing "significant" breaches in the service contract.

Too late, because Excite@Home filed for bankruptcy protection, sold off its Excite division for a $6.69 billion loss, kicked AT&T Broadband customers off the network and gave the others three months to migrate.

Who's to blame? Maybe it's Excite@Home executives, who reached a little further than they should have and sunk the company quickly into the red. Maybe it's AT&T Broadband, Cox and Comcast, who decided they would fare better on their own without working out an exit plan together to spare their customers grief? Or maybe it's the greedy @Home creditors, who are forcing the company to shut down on Feb. 8.

The answer? None of the companies above are solely responsible for the mess millions of cable Internet customers are experiencing today. But, like the proverbial straw that broke the camel's back, all have a part in culpability.

So far, reaction at the federal level has been nil, despite the fact that millions customers in every voting district in the nation are involved. In fact, the government is giving every indication it will write cable companies a blank check to run the industry as they see fit.

So far, the Federal Communications Commission (FCC) has sat back and let market forces dictate the course of the cable industry, a move many expected of its chairman, Michael Powell, a Republican who believes in the power big business has to spur national growth.

It's rumored the FCC is ready to announce its cable policy to the U.S. in a couple of weeks, a policy that reiterates the cable companies view they are a content provider, not a telecommunications service. If cable companies avoid the 'telco' label they will be free to continue operating as they are, without fear of violating conditions of the 1996 Teleco Act items like allowing competing providers on their network and strictures for pricing policies.

It's a notion that's got advocacy groups up in arms.

Jeff Chester, executive director for the Center for Digital Democracy, said the @Home collapse is a dilemma that could happen again at any time if the FCC rules in favor of cable companies.

"The message we see with recent events is that the single operator model is wrong," he said. "We're going to replace a closed network like @Home with closed networks operated by big cable companies. The cable companies have been operating a full-court press with their lobbyists to keep it that way, and the FCC's (Federal Communications Commission) expected ruling will reinforce the belief they can charge what they want and who they will or won't allow on their network."