Time Is Money
The cable modem industry gains speed as it accelerates Internet access
In the increasingly competitive communications market, a line into a home or business is a connection to success.
That's why smaller Internet access providers, including PSINet Inc., Herndon, Va., are running scared from powerhouses AT&T and MCI, which already have a physical presence in homes and offices, as well as a billing relationship. PSINet this month announced it would cut its work force by 15 percent and effectively get rid of its consumer sector to concentrate more on the business market. The pre-emptive move, admitted PSI, was a direct result of AT&T's offer of five free hours of Internet access a month to its phone customers.
Although phone companies have an advantage in selling Internet access, they are not the only ones with ready-made lines into people's workplaces, homes or wallets. Cable television, though not as ubiquitous as telephones, has emerged rapidly as a staple of modern life in America. What's more is that Internet access through cable modems is about 1,000 times faster than over traditional phone lines.
The combination of opportunity and technology has not gone unnoticed in the cable industry. Over the past year, cable modems have been popping up at trade shows and on manufacturers' business plans. So far, most cable modems work with computers.
Telephone companies are countering cable modems with ISDN, which offers fast connections, but not nearly as fast as cable. By 1998, 2 million consumers will use cable modems, according to Emily Green, an analyst at Forrester Research, Cambridge, Mass. "ISDN has a head start, but it will end up playing second fiddle to data over cable," she said. "As soon as consumers see what data over cable offers, they won't hesitate to switch."
Cable modems can link users directly to the Internet or to content providers. Because the technology is faster, it is likely to drive down on-line fees.
The latest news in cable technology shook the industry's idea of cable modems as simply a faster phone line. Zenith Electronics Corp., Glenview, Ill., and Diba Inc., a Silicon Valley company, have come up with an interactive technology that gives Internet access over televisions. Zenith later this year plans to come out with interactive television sets called "NetVision," which will allow people to surf the World Wide Web, access e-mail and use Java applications.
The interactive televisions will have an Ethernet port for connecting to cable modems and will cost about $400 to $600 more than traditional TVs.
Like the AT&T Internet offering, the Zenith product targets those individuals or businesses that need an extra nudge to get on-line. NetVision "makes perfect sense for TV viewers to access global information from the Internet," said Al Moschner, Zenith's president.
Zenith chose April to make its debut in the Internet business. In addition to the Diba partnership, the company launched a new cable modem system with U.S. Robotics. The system, called "HomeWorks Universal," allows cable operators to offer Internet access using one-way cable technology.
"We are addressing the immediate needs of one-way operators who want to get into the data business today by offering the option of a telco return cable modem product," said William G. Luehrs, president of Zenith Network Systems division.
Another significant partnership in the cable modem market has just been formed between Motorola Inc., Schaumburg, Ill., and Cascade Communications Corp., Westford, Mass., which handles 70 percent of Internet traffic through its switches. The deal is to jointly market cable products, taking advantage of both companies' market share and technological capabilities. "While Motorola has developed the high-speed broadband access to the home, Cascade's switches will enable consumers to avoid narrowband bottlenecks in public data networks," said Jim Phillips, corporate vice president at Motorola. The idea, he said, is to create a seamless, high-speed connection from Internet server to the person surfing the Web.
Besides marketing partnerships, companies find that compatibility in cable modems is vital. Palo Alto, Calif.-based Hewlett-Packard recently said it would add the Motorola CyberSURFR cable modem to its line of products. That means cable operators and telecom companies that sell Internet access through HP's broadband system can use the Motorola cable modem.
Rivals AT&T Network Systems, Basking Ridge, N.J.; Hewlett-Packard; Intel Corp., Santa Clara, Calif.; and Hybrid Networks in Cupertino, Calif., have formed "the broadband link team" to develop interoperable standards.
"Having the ability to buy products from different vendors and be assured that the products work together is a top goal of cable operators," said Richard Green, CEO of CableLabs, Denver, Colo.
Industry applauded the team, saying high-speed access is necessary for Internet use to increase. "The kind of effort that these companies are putting forward will be essential to make rich, on-line services widely available," said Ted Leonsis, president of America Online's services division, Vienna, Va.
Speeding up the process is also vital for those companies that see Internet access as a growing form of entertainment. "The intersection of powerful home computing and high bandwidth communications is creating the most powerful new medium since the invention of television," said Intel vice president of corporate business development, Avram C. Miller.
Cable modem trials are being launched all around the country. One ongoing trial targets college students. Each dorm room at Boston College has been equipped with both cable TV and Internet via cable modem. Continental Cablevision is running the trial with hardware from Digital Equipment Corp. and Motorola.
If telcos and cable companies make the most out of wiring homes and businesses, it makes sense, some say, that the next regime to burst onto the scene could be electric or gas utility companies. Until then, computers - and now televisions - are the favorites.