Wednesday, June 13, 2001

The Disney Channel display lures visitors to the
National Cable and Telecommunications Association
Convention and International Exposition Monday in
Chicago. Cable leads telephone, satellite and wireless
industries in offering broadband service.

Cable emerges
as leader of the

Its 4.7 million customers put it
way in front in the race to provide
faster Internet access

Star-Bulletin staff and wire

CHICAGO >> Operators of cable systems are watching with relish as rivals in the high-speed Internet market struggle through rough times. "Who unplugged the Internet?" asks an ad run by the business unit of cable giant Cox Communications.

Cable companies, gathered here for their annual convention, already have seized the lead from telephone, satellite and wireless industries in the race to bring Americans the next generation of Internet services, called "broadband." Now, they may be able to drive the wedge further by capitalizing on the woes of their competitors.

A number of upstarts offering fast Web access over souped-up phone wires -- called digital subscriber lines, or DSL -- have closed shop, victims of an economic downswing and the regulatory complexities of breaking into a new sector.

"There is a ripe playing field here for cable operators to take advantage of," said Michael Goodman, senior analyst with the Yankee Group, a consulting firm.

The cable business already enjoys a comfortable lead in offering high-speed access with 4.7 million customers in the United States, according to the group. About 2.2 million people subscribe to DSL service from a phone company or other Internet provider, while 98,000 customers hook up to high-speed Internet via satellite.

Oceanic Cable, a division of AOL Time Warner Inc., is Hawaii's largest Internet service provider, with more than 56,000 subscribers to its Road Runner cable modem service. Last week, Oceanic Cable raised the monthly fee 5 percent for new Road Runner subscribers, to $41.95 from $39.95. The company said the increase would help cover rising costs of providing service, and would bring local prices in line with other areas on the mainland.

Oceanic's main competitor, Verizon Hawaii , does not disclose the number of its subscribers for its DSL service.

Goodman cites several reasons for cable pulling into the lead: the industry has benefited from its first-to-market advantage, more widespread availability, better prices, easier installation.

And cable operators are more than ready to bring their product to customers who don't yet have broadband or whose DSL providers have gone out of business.

When a Wisconsin Internet business stopped providing service, Charter Communications offered disconnected customers a chance to subscribe to cable Internet access "without any pain," says Charter president Jerry Kent. That meant giving significant discounts, so customers could switch over seamlessly, he said.

The company has been able in several markets to attract people who "literally have been left in the dark," Kent said in interview. Local managers typically decide how to market their products.

Cox Business Services offered to install its service for free for abandoned DSL customers, within five days in some markets.

Cox says it has seen call volume go up by as much as 100 percent in two of the markets where the "unplugged" ad has run. In its marketing campaign, the company boasted of its reliability and pointed out that by owning its networks it can control how quickly it provides service.

Cable executives in Chicago echo their belief that they have a sturdier, more reliable product.

"We deserve the lead," said Kim Kelly, chief financial and operating officer at Insight Communications, among the nation's top 10 cable companies.

Kelly asserted that her industry has invested more than the nation's telephone companies to upgrade systems for offering two-way Internet service.

And while even cable providers have had to work out some kinks with their Internet service -- she noted problems with e-mail as an example -- they have managed to keep their customers from leaving.

Comcast Corporation president Brian Roberts admitted that some were wary of how cable companies would fare as they poured billions of dollars into the Internet business.

"When our industry started making investments, there was tremendous skepticism about whether this was going to work," he said.

But now he sees growth as inevitable: "People are addicted to speed and having it 'always on."'

There is plenty of room to add new customers in the years ahead. Cable Internet service passes 60 million homes, according to the industry, meaning that tens of millions of people could still sign up.

Despite their industry's early lead, some cable operators warn against resting on past successes or discounting the power of rivals. The nation's four Bell companies, delivering DSL service over phone lines, remain in a prime position to capture customers in their markets.

"We feel ourselves to be in a very competitive situation," said Mike Luftman of Time Warner Cable, which has more than 1.2 million high-speed Internet customers.

"There are very large local telephone companies with very deep pockets."

Goodman agrees that cable companies can't let their guard down altogether: "I don't think DSL is going away. There is clearly a market out there."

E-mail to Business Editor

Text Site Directory:
[News] [Business] [Features] [Sports] [Editorial] [Do It Electric!]
[Classified Ads] [Search] [Subscribe] [Info] [Letter to Editor]

© 2001 Honolulu Star-Bulletin