Thursday February 4, 11:25 pm Eastern Time
Cable pulling ahead in high-speed Internet race
By Dick Satran
SAN FRANCISCO, Feb 4 (Reuters) - Cable modem is gaining ground over telephone in the high-speed Internet access market war now being waged in U.S. homes, said an executive for a company that supplies chips to both camps.
''Cable clearly has a lead in (high-speed) access to the home,'' said Broadcom Corp. chief financial officer William Ruehle at a Nationsbanc Montgomery technology conference in San Francisco.
Cable modem's growth will be pushed even harder this year by AT&T Corp.'s acquisition of Tele-Communications Inc, the largest cable provider and the owner of cable modem leader AtHome Corp., Ruehle said. Increased use of digital television technology through cable systems will also boost the sector.
Cable modem reached 700,000 installations by the end of 1998, Ruehle said, while only about 50,000 high-speed telephone lines have been installed, Ruehle said, citing recent market research figures.
Cable modem's development over the past year was ''beyond our expectations,'' Ruehle said, but high-speed digital subscriber lines, or DSL, run through telephone wires, so far is ''more words than modems.''
Broadcom makes computer chips that are embedded in cable modems, and it also supplies chips used in the high-speed ''DSL'' telephone modems. Its specialty is to make chips for a variety of delivery systems to carry voice, video and data.
''We are the arms merchant,'' said Ruehle. ''We are aggressively pursuing both those markets (cable and telephone).''
Cable modems, now in the $300 range, are a barrier to entry for some consumers, but Ruehle said they will soon fall to the $150 range, giving another spur to the market's development. As a supplier to the market, Broadcom's chip prices are also likely to fall, but it will make up for this with ''an increasing silicon share of broadband solutions,'' meaning its chips will be engineered to perform more of the specialized functions of set-top boxes and cable modems.
Broadcom's quarterly revenue has surged more than tenfold since the start of 1997. Its quarterly revenue then was $5 million and in the most recent quarter its revenue climbed to $70 million.
Ruehle said the company expects to grow with the booming cable modem and digital television markets.
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