Cable's broadband lead whittled by DSL,
satellite services
By Patrick Ross
Staff Writer, CNET News.com
January 9, 2001, 8:40 a.m. PT
WASHINGTON--DSL providers continue to erode the cable industry's domestic broadband
market lead, a federal report said Monday, with direct broadcast satellite (DBS) providers
poised for gains.
The Federal Communications Commission in a 134-page study concludes that video services
are not the only area in which the cable industry is seeing competition. The study predicts
that by 2004 nearly half of all Internet connections in the United States will be high-speed
broadband.
"DSL technologies remain the most significant competitors
to Internet over cable," the report concludes, noting that
phone company pricing is now competitive with cable and
both offer high-speed, two-way connections. DBS services
rely on a telephone return path, but the FCC noted that
both DirecTV and EchoStar plan to offer high-speed,
two-way broadband connections as early as this year.
The FCC report "confirms the irrefutable trend of the last
five years--direct broadcast satellite is cable's head-on
video competitor and is rapidly becoming a significant
competitor in data as well," said David Beckwith, vice
president for communications at the National Cable
Television Association.
Cable still has its broadband lead, the FCC said: As of June
2000, there were about 820,000 DSL subscribers vs. more
than 2.3 million cable broadband subscribers. However, the
agency said, "the rollout of DSL and other broadband
technologies is accelerating." The FCC cited a Morgan
Stanley Dean Witter report that predicts 10.1 million DSL
subscribers by the end of 2002, more than the projection of
9.1 million cable-modem subscribers.
Verizon Communications co-chief executive Ivan
Seidenberg said Monday that his company's DSL subscriber base had increased fourfold in
2000, to 540,000 subscribers.
Video may be the key
But the tremendous growth of DBS as a video provider was cited as a reason to consider that
industry a threat to cable's broadband dominance. In the last year, the number of DBS
subscribers grew to 13 million homes from 10.1 million, vs. 67.7 million cable homes. More
than 15 percent of all multichannel video subscribers are DBS customers, and DirecTV and
EchoStar are among the top 10 video providers in the United States, joining the ranks of
AT&T Broadband, Time Warner Cable and Comcast Communications.
According to the FCC, the biggest
liability DBS suffers in broadband is
its inability to send back high-speed
data from the customer to a satellite,
instead requiring a dedicated phone
line. But DBS companies are working
to change that.
By 2003, DirecTV will shift from its DirecPC telephone-return system to a Ka-band satellite
system called Spaceway. A partnership with Hughes, Spaceway promises to bring faster,
two-way connections. DirecTV also has a partnership with America Online and hopes to offer
two-way connections soon using Ku-band satellites, the FCC said.
EchoStar has a stake in Starband, formerly Gilat-2-Home. Starband, which aims shortly to
begin offering two-way, high-speed Internet services, launched its first satellite in November
and also boasts Microsoft as a partner.
EchoStar also has invested in WildBlue, formerly iSky, which will use Ka-band and spot-beam
technology to deliver two-way, high-speed services later this year. WildBlue's other prominent
investors include Gemstar, Liberty Media, Kleiner Perkins Caufield & Byers, TRW and
TeleSat.
The FCC was cautious as to how much success these ventures might have, saying their
strongest chances lay "in the estimated 20 to 30 million homes in rural and suburban areas
that may be unable to receive cable or DSL for the foreseeable future."
Still, the cable industry cited this increased competition as yet another reason not to impose
federal regulations on its industry, such as forcing it to carry competing Internet service
providers on its broadband network.
"This competition is reason enough to reject government micromanagement of these
communications markets," Beckwith said.
The FCC report is conducted annually as a mandate in the 1996 Telecom Act, and this year's
release was approved by four of the agency's five commissioners. Commissioner Harold
Furchtgott-Roth dissented, as he has every year, saying the agency's examination was too
narrow.
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