Broadband war heating up
Report sees DSL overtaking cable within two years
Tyler Hamilton
TECHNOLOGY REPORTER
High-speed Web access over phone lines will overtake rival cable modem
services by 2003 and prices for both products will fall over the next four
years, predicts a new Canadian Internet report obtained by The Star.
The report by IDC Canada Ltd. concludes that in two years 55 per cent of all
``broadband'' households in Canada will choose phone lines as their preferred
high-speed route for accessing the Internet, compared to 45 per cent who
favour cable modems.
According to IDC, the intense rivalry between cable and telephone companies
and the falling cost of network equipment and service providing will result in
lower prices by 2005.
This contrasts with the trend toward higher prices in the United States, a
high-speed laggard compared to Canada where nearly 10 per cent of all
households have broadband access to the Internet.
``Lower prices will further widen the penetration gap between Canada and the
United States in Canada's favour throughout the forecast period,'' writes IDC
analyst Lawrence Surtees, author of the report.
Currently, the price for high-speed service in Canada is about $40 a month.
IDC estimates this price will hold firm until 2003, after which monthly
services charges will fall to $33 by 2005.
Surtees said the broadband battle taking place in Canada is going through a
dramatic reversal. He said the cable companies, the undisputed high-speed
leaders as recently as a year ago, are witnessing the once slow-moving
telephone companies aggressively catching up.
``It's the classic tortoise and the hare story,'' Surtees said. ``The cable
companies should be afraid.''
For example, Bell Canada had about 70,000 high-speed subscribers in 1999
and 290,000 in 2000, compared with 184,000 and 312,000 respectively for
Rogers Cable Inc. As of March 31, Bell had 466,000 subscribers compared
with 350,000 for Rogers.
Rogers, to be fair, only operates in Ontario, where it's still ahead of Bell. But
Bell is ahead in Quebec, similar in the way Aliant Inc. has taken top spot in
Atlantic Canada.
Surtees said the past few months have been particularly troubling for cable
companies such as Rogers and Shaw Communications Inc., which have seen
slower growth rates for their respective @Home Internet services in light of
well-publicized service outages.
``The absolutely atrocious customer service and network problems that have
befallen the cable @Home service appears very much to be taking its toll,'' said
Surtees. ``There has been improvement, but the damage has already been
done.''
Rogers is spending more than $300 million over a three-year period to improve
the quality and reliability of its service. The Toronto-based company said
progress has already been made and the volume of customer service calls has
dropped considerably.
Bell, for one, has been the prime beneficiary of service problems at Rogers,
scooping up newcomers that have been inundated with horror stories from
cable subscribers.
Across Canada, the cable companies still have nearly a 2-to-1 lead over the
telephone companies, but the gap continues to shrink as aggressive marketing
and network expansion efforts from Bell and its peers nibble away at cable
market share.
In western Canada, where Shaw enjoys a 4-to-1 lead over Telus Corp., the
gap is also expected to close. Shaw, the national leader in terms of high-speed
access, had 400,603 @Home subscribers as of March 31, compared to
104,000 DSL customers for Telus.
Telus launched a five-year, $500 million project last fall to accelerate its DSL
network rollout. It has earmarked $200 million this year in hopes of having
160,000 customers by year-end and narrowing Shaw's lead.
Surtees said the next two years will be a crucial time for both the cable and
telephone companies as they enter this second-phase of broadband warfare.
``Neither side can afford a misstep.''
John Tory, chief executive of Rogers Cable, told The Star yesterday that the
@Home product is based on a superior technology that he will continue to
make more reliable. He also plans to add more features and ``sell very
aggressively'' to keep Bell at bay.
Tory said he's comfortable that Rogers will maintain at least 50 per cent of the
market over the coming years, adding that @Home has strong staying power.
``But I'd like to do much better than 50/50,'' he said.
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