The Wall Street Journal Interactive Edition -- March 15, 1999
Special Report: Convergence
Cable Modems Look Like
The Hot New Thing -- Again
By KRISTI ESSICK
PARIS -- Lots of cable operators pledged to roll out broadband Internet access last year, but few cable modems have actually landed in the hands of European Web surfers.
"We thought at the beginning of 1998 that we might have [cable-based Internet] services by end of 1998," says Roy Payne, spokesman for London-based Cable & Wireless Communications PLC, a unit of Cable & Wireless PLC. "But the simple technical issues take longer to resolve than people anticipated."
Cable modems, offering quick and relatively inexpensive Internet access, could open the door to videoconferencing, interactive electronic commerce and online broadcasting.
Such services, and the hardware to provide them, will likely be hot topics at CeBIT, Europe's biggest information- and telecommunications-technology trade fair, held in Hannover, Germany, in March. But actual modem deployment has been held up by regulatory disputes with telephone companies, a lack of investment capital and questions over hardware standards.
How to Watch TV and Be on the Net
Internet traffic flows over leased lines to the cable operator's hybrid fiber-coaxial network, where a head-end controller converts the Internet-protocol, or IP, traffic into signals that can be sent over the cable network. In the customer's home, a cable splitter sends Internet traffic to the cable modem and TV traffic to the TV set-top box, so that users can watch TV and be connected to the
Internet at the same time. The cable modem unscrambles the signals, converting the data back into IP packets, then communicates with the PC via an ethernet card installed inside the PC.
"In general, there has been a vacuum of high bandwidth in Europe," says Joe Sawyer, an analyst with Forrester Research. Late last year, he adds, Europe had "less than a tenth" of the some 700,000 cable modems in use in the U.S.
That's not to say progress hasn't been made at all. In Belgium and the Netherlands -- where more than 90% of television households subscribe to cable service -- and in countries such as France, Denmark and Austria, operators are already offering high-speed cable-modem service on a small scale. But the potential of cable modems remains largely unrealized.
This potential lies in cable modems' ability to offer a permanent, open connection to the Internet -- without the per-minute phone charges that have inhibited many Europeans from Web-surfing. They are also able, thanks to their dazzling access speeds, to download up to 10 megabits of information per second, although actual speeds are
often closer to two Mbps since users share network capacity.
Regulatory squabbles have erupted where incumbent telephone operators own the cable infrastructure. If cable modems catch on, telecoms stand to lose dial-up and ISDN (integrated services digital network) customers, as well as potential future customers of DSL (digital subscriber line), a phone network-based high-bandwidth technology. "It is almost always in the worst interest of PTTs to see cable modems take off," Mr. Sawyer says. Phone companies are pushing ISDN and DSL, so "cable modems are very threatening."
Delivery Rates
Transfer time for a 10-megabyte file
Modem Time
Transfer Time
28.8-Kbps analog modem
46 minutes
56-Kbps analog modem
24 minutes
128-Kbps ISDN modem
10 minutes
4-Mbps cable modem
20 seconds
10-Mbps cable modem
8 seconds
Source: cablemodems.com
Take Cybercable, a service run by Lyonnaise Cable, which is controlled by Suez Lyonnaise des Eaux SA, for example. It has been offering cable Internet access in some cities, including Strasbourg and parts of Paris, since 1996. Full-scale access in the French
capital has been held back by the delayed upgrading of the network infrastructure, which is owned by France Telecom SA. Last summer, the French regulatory authority ordered the telephone company -- which recently announced its intention to sell the cable infrastructure -- to finish the upgrade by Dec. 31, 1998. Lyonnaise Cable now predicts
its cable-modem service will be available throughout Paris at the end of March.
A similar roadblock exists in Germany, a laggard in the provision of cable-modem services. Deutsche Telekom AG owns nearly one-third of the German cable network. In May, Deutsche Telekom decided to spin off its cable business into regional companies; each one is to seek partners to offer advanced services. Deutsche Telekom says it can't
predict when this new cable structure will be in place, as it is in the first phase of negotiations with possible investors.
"Deutsche Telekom hasn't laid new fiber and there are enormous investments to bring it up to speed," says Andy Greenman, a senior analyst at telecommunications consultancy Yankee Group. Smaller players, such as o.tel.o Communications GmbH, are planning to
commercialize cable modem services this year. Without access to Deutsche Telekom's network, these offerings "will be of very limited geographical reach," he adds.
Deutsche Telekom says it is up to interested investors to pay for any infrastructure upgrade needed for cable modem services. Meanwhile, o.tel.o calls the company's reluctance to pin down a sell-off strategy a stalling tactic aimed at boosting the development of its own DSL services.
Ways to Web Services
Availability of high-bandwidth Internet access
Method
Bandwidth Speed*
Status in Europe
Analog modem
maximum 56 Kbps
widely available
ISDN
maximum 128 Kbps
widely available
Powerline access
maximum 1 Mbps
very early trials
Cable modems
300 Kbps-10 Mbps**
very limited availability
DSL modems
300 Kbps-50 Mbps***
continuing trials
*in kilobits per second and megabits per second
**depends on number sharing network
***depends on type of DSL technology
Source: Yankee Group Europe
In several countries, including the U.K. and the Netherlands, where the infrastructure is owned by the cable operators, opposition comes from within.
Some operators haven't been able to justify the investment -- around $50 per subscriber if the company already has a robust hybrid-fiber coaxial network in place, according to one estimate -- because of the relatively low level of Web interest. Just 10% of Western
European households use the Internet, according to Datamonitor. "[Operators] are waiting for the Internet subscriber base to increase to see if cable modems are viable," says Datamonitor's Stephen Adshead.
Other initiatives have gotten in the way, as well. In the U.K., cable operators are gearing up to offer digital TV, leaving less capital to invest in Internet access. "We're investing tens of millions of pounds in digital TV," says a spokesman for Telewest Communications PLC. "We can only do so many things at any one time." At CWC, Mr.
Payne says: "Digital TV is the priority."
On top of cash concerns, there is the nagging question of hardware standards. Two generally accepted broadband cable standards exist: DVB-RC, trumpeted by European companies such as Thomson SA's Thomson Multimedia SA and Alcatel SA; and DOCSIS, which is backed by U.S. cable-modem makers such as Motorola Inc., General Instrument Corp. and 3Com Corp. Pace Micro Technology PLC and a few others are developing both kinds of equipment.
While DOCSIS modems are already on the market, some European operators want to wait for DVB-RC-based modems, which will be compatible with their digital TV plans, Mr. Adshead says.
NTL Inc. -- in which Microsoft Corp. recently invested $500 million to develop Internet
services -- embraced both approaches. The British cable operator will use 3Com's
DOCSIS products for its second-quarter PC modem rollout, but will go with DVB-RC
for a separate launch of cable set-top boxes, a company spokesman says. NTL says it is
tailoring products for those who want fast PC access and those who want interactive TV
services. Later on, the company may settle on one type of technology or identify a
software solution that will allow it to run both simultaneously. "We've kept an open
mind," he says.
Or perhaps the company felt some heat. With satellite and DSL services coming to
market, cable operators can't afford to wait. |
