Claude et all,
a nice article about why the cable MSO's are slow to roll out cable modems.
After the Hype, Modems Slow to Roll
By LESLIE ELLIS & FRED DAWSON
With two months gone in 1998, the cable industry appears to be inching forward, rather than roaring forward, with its marketing of data services, just as competitors are turning up the heat.
A number of factors are contributing to what industry executives on and off the record described as a frustratingly slow pace that they are hard-pressed to do anything about.
These reasons include: delays imposed by merger negotiations among the leading providers; a desire to deploy standardized cable modems that are not yet in the marketplace; and limitations on marketing efforts imposed by the reach of upgraded plant in any given market and by the costs of beefing up installation and customer-service crews to support a faster sign-up pace.
Last month, Cox Communications Inc. CEO James Robbins voiced the concerns that many executives have over the pace of cable's data push when he suggested that penetration of @Home Network's service in Cox's Orange County, Calif., market was disappointing so far.
He said more had to be done in marketing and in adding new features to ensure that the service gets to 10 percent to 12 percent penetration of online users' homes "fairly quickly."
"We've all purposefully been less than pushy now, knowing that every modem installed now is a proprietary modem, and that's stranded capital," said Nick Hamilton-Piercy, senior vice president of Canada's Rogers Cablesystems. "If we totally stopped, the investment community will say that cable's let us down again, but we can be moderate."
Said a U.S. MSO engineering executive, asking not to be identified, "I'm not planning to really tweak my data-deployment plans until I know for sure that I can get interoperable modems."
So far, with uncertainties surrounding the timing and costs of product still to be resolved, no orders for standardized cable modems -- which are due in the market by year's end -- have been announced.
DSL IS COMING
Meanwhile, what once seemed to be an ever-receding possibility for the use of telephone wires in delivering high-speed data has suddenly become an imminent reality involving not just the telcos, but an expanding base of competitive local-exchange carriers and Internet-service providers.
A new standards initiative backed by computer-industry interests has generated the biggest headlines surrounding the use of DSL (digital subscriber line) technology to deliver data at speeds of 1 megabit per second and better over telephone lines. Beyond that, though, the activity on the DSL front posing the biggest concern for cable can be found in market launches that are under way around the country.
U S West Communications, Ameritech Corp., BellSouth Corp. and GTE Corp. have all begun services, with Bell Atlantic Corp. slated to follow suit by midsummer. But the arena that offers the best snapshot of what's to come is probably SBC Communications Inc.'s territory in California.
There, not only has SBC subsidiary Pacific Bell launched its own branded DSL service, but several ISPs using PacBell's wholesale DSL offering or the DSL services provided by new CLECs are also providing high-speed access to the small-office/home-office and other business markets.
"We expect to roll out DSL services using CLECs, as well as incumbent carriers, in many markets across the country," said Jim Southworth, director of advanced networking services and technologies at Concentric Network Corp. Concentric is a nationally operating ISP that delivers services at 384 kilobits per second and higher using both PacBell's and Covad's DSL offerings in California.
In the San Francisco Bay area, customers will soon have as many as six options for high-speed-data service, said Ian Aaron, president of ISP Channel, a Mountain View, Calif.-based start-up focused on turnkey high-speed-data services for small and midsized cable operators.
"The competitive window is definitely closing," Aaron said. "This is a question of what it costs to acquire a data customer now, versus what it costs to acquire them after they've gotten an ADSL [asymmetrical DSL] modem."
Nor is the competition limited to firms offering services over wires.
CABLE'S BACKYARD
In Denver, for example, the first to market with high-speed data is wireless cable operator American Telecasting Inc., which debuted its $69.95-per-month "WantWEB" data service last week. Next in line to serve Denver -- home to a handful of cable MSOs -- is U S West Inc., which said it will be in the market by June with its "Megabit" data service, several months ahead of Tele-Communications Inc.'s @Home Network service.
One executive close to the companies said the effort to complete the merger of Time Warner Cable's Road Runner service with MediaOne's MediaOne Express service, as well as a flurry of talks between @Home and Time Warner about a possible merger, has inevitably put a drag on marketing efforts.
But the parties insisted publicly that the rollouts remain on track. "Things are moving along nicely," said Sandra Colony, spokeswoman for Road Runner. "We have some announcements [about further rollouts] that we'll be doing shortly."
Colony said Road Runner and MediaOne Express are still targeting mid-March as the time when key decisions will be locked down, such as where the merged entity will be located and who will run the company.
As for @Home, while the service has just added seven East Bay franchises in California to its base, the rollout pace remains a "mixed bag," said CEO Tom Jermoluk.
"Some of [our affiliates] are doing great, and I think that there's a lot of desire on everybody's part," he said.
GIVING DSL A BOOST
The pace of cable data-service rollouts has buttressed convictions among some computer interests that there will be ample opportunity to establish a retail base for low-cost plug-and-play ADSL modems. Still, it is likely to take a year or more to get to a point where retail distribution of standardized "ADSL.Lite" product is possible.
"Cable modems are not taking off as quickly as we might have expected," said Rod Schrock, vice president and general manager of Compaq Computer Corp.'s Consumer Products Group.
Compaq, along with Intel Corp. and Microsoft Corp., is a driving force behind the new Universal ADSL Working Group, which includes the major regional Bell operating companies and DSL vendors in an effort to standardize a robust, self-installing version of DSL aimed at the consumer market.
DSL.Lite as a "retail event" could come as early as this Christmas, or it might not occur until sometime in 1999, Schrock said, noting that Compaq and other computer suppliers could create an "overnight installed base of hundreds of thousands or millions" of DSL modems.
But telcos have many issues to deal with as they push ahead with DSL rollouts, even before they get to the point of agreeing on a standardized approach, noted Lisa Pelgrim, a senior analyst with Dataquest.
"There are distance issues [from home to central office] and issues of how to run ADSL over digital loop-carrier systems, not to mention the amount of equipment that has to be installed," she said.
DSL REMAINS COSTLY
Nor are telco prices where they need to be, even when the service offered is only 256 kbps, noted Joe Zell, president of U S West's Interprise Networking Services. At $40 per month plus $19.95 for Internet access, the 256-kbps version of the multispeed Megabit service is about $15 per month higher than it should be "to be really competitive with cable modems," he said.
Telcos also have to worry about what they can offer beyond speed in efforts to capture a large consumer base. Here, they are well behind the cable industry, where much effort has gone into developing consumer-friendly interfaces and multimedia-enriched content that capitalizes on the power of high-speed access.
But the telco model is not cable's, which means that judging how telcos are doing in high-speed access requires a look at their strategies.
The template in this area is to be found in the new initiative announced last month by U S West involving Microsoft, Sun Microsystems Inc., Oracle Corp. and several other computer-industry interests. By equipping its network with software and hardware conducive to content development across a vast array of applications, U S West anticipates that there will be plenty of activity aimed at giving consumers and businesses value-added incentives to use its high-speed service.
Tim |
