No Wi-Fi From Comcast, at Least Not Yet

Number one cable provider Comcast is keeping a wary eye on Wi-Fi services that its broadband rival Verizon recently rolled out, but said it has no plans to launch a similar service for its high-speed data customers. At least, not yet.

Depending on how Verizon’s new hotspots fare in New York and other markets, that could change, said Comcast spokesperson Sarah Eder.

Eder’s comments came after the company’s chief technology officer, David Fellows, told a technology conference in Boston late last week that Comcast could roll out a similar Wi-Fi offering if Verizon’s draws a big market, according to coverage of the speech in the Boston Globe.

Fellows was speaking to the Massachusetts Telecommunications Council conference at the time he made the comments, Eder said, and was
stressing the company’s ability to overlay wireless access on its own technology, using its coaxial cables and cable headends for Wi-Fi hotspots .

Fellows’ comments about Verizon’s Wi-Fi may have struck a dismissive tone at times, but they also signaled that Comcast is paying close attention to potential threats in what has become a heated race between cable companies and telcos for increased share in the broadband access market.

Verizon has already activated 150 Wi-Fi hotspots in New
York and plans to have 1,000 enabled by year’s end. The service allows Verizon DSL subscribers to use the hotspots for free as part of their monthly service. (See story about SBC’s move to offer wireless Internet access.)

The service is among a flurry of aggressive moves by the regional bell operating company (RBOC) to differentiate itself from high-speed cable modems provided by rivals such as Comcast. Verizon recently dropped the monthly price of its DSL service by about $10 in some markets to $35 in a move aimed at thwarting the growth of cable modem broadband subscribers.

Cable companies account for over 60 percent market share of the
broadband access market right now, according to research by Deutsche Bank Securities. But with telcos expected to follow Verizon’s price-cutting move, DSL providers could start to erode cable’s solid base, DB said in a research note.

“(W)e believe DSL pricing and ARPU (average revenue per unit) have
further to fall,” the report said. At the same time the greater
importance of broadband to cable companies’ cash flow makes them far less interested in “commoditizing” the product by dropping the price.

Verizon’s price cut, and others that may follow, are among a number of reasons that “the dynamics in the broadband race are steadily tilting in favor of the regional bell operating companies,” the note said.

Other factors working in telcos’ favor, DB said, include the vacating of broadband line-sharing rules imposed by the Federal Communications Commission in a recent ruling and the expectation that the FCC could also declare DSL an “information service.” The designation of information service to cable providers’ high-speed data services effectively frees cable companies from having to open their lines to competitors, which telecommunications companies are appealing in order to enjoy the same designation.

DB estimated that total cable modem subscribers now number 12.8 million, accounting for 61.5 percent of the overall broadband market, with DSL at 37.4 percent and other platforms accounting for just over 1 percent. As telcos such as Verizon ramp up their broadband offerings in the next couple of years, DB expects DSL to increase its market share to between 45 and 46 percent.

But as strong as the RBOCs (Verizon, SBC, BellSouth) performances were in collectively signing up about 533,000 new subscribers during the first quarter, cable companies are still leading the growth surge.

During the first quarter, 1.28 million subscribers signed up with cable providers, the report noted. Among cable modem providers, Comcast was the leader of the pack with 417,000 new subscribers alone during the quarter, which surpassed Wall Street’s expectations. And DB’s views about the shifting dynamics toward DSL providers is not shared by all analysts following the sector.

Jessica Reif Cohen, media analyst for Merrill Lynch, said in a note to investors Monday that the investment bank expects Comcast will be able to protect its market share vs. DSL, noting that it recently introduced an introductory offer of $19.99 a month for broadband in some markets.

That’s in addition to its recent offer of $30 for a three month trial in some markets. Cohen noted that Comcast’s “footprint” of high speed data-ready homes is expanding rapidly as it rebuilds the broadband assets it purchased from AT&T.

Verizon’s lowered pricing on its DSL offering is part of the bundling strategy in play among telcos and cable companies. In Verizon’s case, the bundling includes a spate of services on one bill, such as local and long distance calling in some markets, cellular and high-speed data — along with wireless access for free.

But while DSL providers such as Verizon aim at cable providers’ share of the broadband market, cable providers such as Comcast are eyeing the telcos’ voice market.

Comcast’s Eder said the company has a VoIP trial underway in Philadelphia and expects its voice over IP services to be “ready for prime time” sometime in 2004.

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