Cable modems vs. DSL; Microsoft hedges its bets
By Matthew Broersma, ZDNet
Monday June 15 11:43 PM ET
News of investments by Microsoft Corp. (MSFT) and Compaq Computer Corp. (CPQ) in the RoadRunner cable-modem Internet access service Monday sparked renewed debate about what kind of connection will tie the home or office of the future to the Internet.
While cable-based systems currently have substantially more subscribers than digital subscriber line (DSL), the telephone-based high-bandwidth system, some observers said the newest products from the Regional Bell Operating Companies (RBOCs) have far more potential.
Microsoft and Compaq have made other investments in the cable-modem market, notably Microsoft's billion-dollar contribution to cable provider Comcast Corp. last year. But they are also active supporters of the competing technology DSL.
The competition between DSL and cable modems is a horse race to see which industry -- cable providers or telephone companies -- will be the ones to cash in on the next generation of consumer Internet access.
"Over time, the world likes a generic way of doing things," said Rob Enderle, director of desktop and mobile technology at Giga Information Group. "One or the other will win."
Constant access Both DSL and cable modems offer not just greater speed than the conventional analog modems used today. They also offer a persistent connection -- the "always on" capability that business users enjoy at work. And that in itself, combined with greater speed, could lead to a new world of applications, from videoconferencing to home networking.
But it is increasingly unclear which technology has the upper hand.
Cable modems, which deliver Internet access over a cable-television connection, are far better established, with around 200,000 subscribers in North America.
"That's 190,000 more than the telcos have," said analyst Jim Wahl of the Yankee Group.
Telcos trying to rally The Baby Bells, for their part, have been making a slew of DSL-related announcements over the last week, announcing the upcoming rollouts of asymmetric digital subscriber line technology on both coasts, and even hailing a new, more reliable type of DSL -- optimistically called consumer digital subscriber line (CDSL).
DSL, a digital technology, uses standard phone lines but requires the phone company to install special hardware in your house.
"DSL technologies, on the whole, are about a year and change old. Cable modem technologies are 6 or 7 years old at least," said Harry Fenik, director of analysis at Zona Research Inc. "While ADSL is not the second coming -- and frankly, neither is CDSL -- it provides a taste of what can be done with existing infrastructure."
He said that once the telcos put their mind to it, the rollout of this technology can be "swift and deep in penetration."
Will cable hang on? So are the cable-modem companies -- including RoadRunner and market leader @Home -- squandering an early lead?
Not quite, say many analysts, arguing the telcos have yet to demonstrate they can effectively get users to buy next-generation technology.
"The keywords we're hearing from the RBOC community is that they're going to be rolling it out," said analyst Lisa Pelgrim with Dataquest. "Cable already has significant rollout."
And what's more, with the limited geographic reach of both technologies, it could be some time before anyone has to choose between them: "If you have a choice of one option in the next three years, you'll be pretty lucky," Pelgrim said. "If you have a choice of two, buy a lottery ticket."
DSL will deliver Some believe that in the long run, DSL will be able to deliver the necessary bandwidth and persistent connection with a minimum of infrastructure upgrades. And what's more, a single DSL connection can serve every telephone line in the house, opening up the prospect of an in-home computer network.
"The prospect of instantly creating an environment where the whole house becomes Net-enabled is an extremely attractive one," said analyst Fenik.
The bottom line, says Giga's Enderle, is that neither the telcos nor the cable companies are doing everything they can to roll out their technology quickly.
The reason? It would mean replacing a lot of the infrastructure they've invested in over the years, which is, after all, still fine for carrying telephone or cable-TV signals.
Outer-space access? And then there's the potential of satellite-based Net access looming overhead like the sword of Damocles.
"There's the increasing possibility that after they finish (upgrading), this will all become obsolete from the next-generation satellite technology, and people will be uplinking through satellites instead of using wiring at all. ... Wireless could take both (DSL and cable modems) out."
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