Here's an interesting analysis of the cable vs. dsl debate that anyone can understand; comments welcome especially those offering counterpoint to the writer's predelection.
<<THE HI-TECH FRONTIER
By James Wheeler
DSL vs. Cable
I'm writing to comment on AOL's announcement last week of a blockbuster deal
with SBC, the super-regional Baby Bell, for high-speed phone access via
ADSL, Asynchronous Digital Subscriber Line. This should be a signal to
everyone that AOL is working diligently to clear the only possible cloud
(lack of broadband access) that analysts saw on its horizon. Not only will
SBC give AOL and its customers broadband access in major Southwest and West
Coast markets like Texas and California, but it also gives them the major
Midwestern markets as soon as SBC's acquisition of Ameritech closes.
Because AOL took the unusual step of telling reporters that deals similar to
the SBC deal are in process, I have to believe that announcements will also
soon be forthcoming on deals with outfits like US West, Bell South, GTE,
and - best of all - MCI WorldCom, with which AOL already has numerous
business ties.
Cable access has several shortcomings. Price is one of them. Bell Atlantic
has priced their AOL DSL (Digital Subscriber Line) service at $40 per month,
which is apparently the sweet spot, and SBC is expected to do the same.
Bell Atlantic is also offering a complete setup, including the modem, for
$99. The modem price is key. People receive promotions from their local
cable companies about AtHome's service, which on the face of it appears cost
competitive, but when they learn the modem costs a whopping $300 to purchase
or $25 - $35 per month to rent, they say thanks, but no thanks. Cable has
to be priced LOWER than DSL in order to compete, because DSL, which is also
high speed and "always on", gives users an extra line that they can use for
other purposes, while AtHome only gives you Internet access.
I understand some cable companies are offering the modem free of charge in
certain East Coast markets. But that points up another weakness with the
cable and AtHome (by far the dominant cable access service): It varies
from cable company to cable company. Installation is backlogged wherever
AtHome is being sold, and it's the cable companies that handle it. The
cable companies - not AtHome - also handle billing and most other customer
service, and, as you can imagine, it's uneven. To be sure, phone companies
don't have any better reputation for customer service and installation, but
SBC and the other Baby Bells have such large, contiguous service areas that
they should be able to standardize procedures better than the cable
companies have done to date.
The LA Times recently ran an article about the fractious nature of relations
between AtHome and its cable company owners and board members. At a recent
board meeting, the cable guys, which have a very different mindset than the
AtHome Internet guys, got into a big fight with AtHome management. They're
terribly concerned over AtHome's plans and desires to give Excite
preferential treatment. They want AtHome's service to be open to all
comers. I don't think we've heard the last of the infighting, and of course
that doesn't bode well for AtHome's ability to focus on its strategic goals.
That same LA Times article highlighted customer complaints and
dissatisfaction, not only with delays in installation and finger-pointing
between AtHome and the cable companies when it comes to fixing and taking
responsibility for problems, but also with system performance. This is
another major problem with cable access: As more people in a service area
sign up for AtHome's service and use it, system responsiveness deteriorates
appreciably, because the data is all going through the same lines. When
cable access becomes popular in a given neighborhood, system performance
falls to speeds comparable to DSL, whose performance is unaffected by the
number of users because every customer has their own private line.
Cable companies and AtHome haven't yet recognized that many people use their
Internet connection not only at home, but at work and on the road, too. For
example, many busy professionals take their laptops while traveling and need
to log in wherever they are. If they are AtHome customers, they can't log
on except at home (pardon the pun) - unless they ALSO have a dial-up
service. I can't believe many people would pay for both. The cable
companies should establish a relationship with an ISP to provide a limited
number of hours per month in dial-up service to their AtHome customers for a
minor, extra monthly charge. Until they address this issue, they're going
to miss out on many members of our increasingly mobile society. For AOL
subscribers, the regular dial-up service is available wherever DSL is not.
Finally, it's important to consider that cable access via AtHome and the
like is not even an option for a significant number of Americans and
billions of foreigners, because the cable companies don't serve wide swaths
of geography. Major metro areas in the US all have cable, but many rural
and some suburban areas don't. Nearly every American has a phone, though,
and even in developed countries, wireless phones and systems are
proliferating. Cable Internet access has made a big splash here in the US,
but hi-speed phone access clearly has more potential to be pervasive on a
global scale.
James Wheeler is a CPA living in California.
James@businessblueprints.com
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