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,

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

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 [email protected] 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
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 [email protected]
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 [email protected] 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 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 [email protected] board of
directors, didn’t help matters by later placing a $307 million bid on the
ISP side of [email protected] They later
backed off
, citing “significant” breaches in the service contract.

Too late, because [email protected] filed for bankruptcy
, 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 [email protected] 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

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.”

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