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.”
