The Long Road to Broadband: Converging on the Last Mile

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BEST PRACTICES SERIES

The Delivery Channels

Cable
Cable is the first choice among home users looking for high-speed Internet access, downloading data at speeds ranging from 500Kbps to 2Mbps. The ranks of cable operators offering Internet access have nearly tripled in the past 24 months, by a full 90%. AT&T is the largest broadband cable operator with more than one million subscribers, primarily through its Excite@ Home division. But overall, the cable rollout has been slower than anticipated, and many of the big-name cable operators now find themselves in a cashflow crunch, caught between lagging demand and higher-than-expected customer acquisition costs.

While cable companies can already reach a majority of their target customers with one-way cable lines, upgrading for interactive Internet use is an expensive proposition. Already swimming in debt, cable companies are reluctant to take on additional loans, fearing they too could face equal-access legislation.

DSL
Similarly, the DSL market faces a questionable future, as competitors multiply, margins shrink, and demand continues to lag behind projections.

Meanwhile, rates for home DSL service, which can download data at speeds up to 1.5Mbps, may be on the rise. In February, SBC Communications, the largest of the DSL service providers, raised its monthly rate from $40 to $50. EarthLink, BellSouth, and others quickly followed suit. Bankruptcies and financial troubles at other DSL companies like PSINet and Covad Communications could indicate further price hikes on the horizon. Nevertheless, DSL should soon outpace cable as the leading choice among home users for high-speed Internet access. Cahners In-Stat Group forecasts that by 2002, residential cable subscribers will reach seven million, and residential DSL subscribers will total nine million.

Satellite
There is less enthusiasm for the current satellite technology to deliver broadband Internet access. Although the domestic satellite subscriber base is expected to grow from under 200,000 currently to more than four million by 2005, this growth will be largely attributable to the fact that satellite dishes can deliver service to rural and remote areas where cable and DSL lines don't go. Yet satellite technology remains expensive and relatively slow, offering download speeds of generally less than 400Kbps.

Still, despite the humbling of satellite players Iridium, ICO, and GlobalStar, media tycoon Rupert Murdoch and Microsoft are in talks to bid for a controlling stake in digital satellite broadcaster Hughes DirecTV. But Murdoch and Microsoft are betting on a more profitable aspect of satellite technology-digital television broadcasting-avoiding the mobile telephony markets that sunk the others. The largest markets for broadband satellite applications will likely remain extremely remote areas that cable and DSL don't reach, and in-flight Internet access.

Wireless
And so, with the plethora of troubles facing cable, DSL, and satellite technology, wireless looks to be the come-from-behind winner in the broadband sweepstakes. The leading wireless alternative, fixed wireless, utilizes rooftop antennae to deliver Internet access at speeds up to 1.5 gigabits per second, much faster than DSL or cable. Researcher eMarketer predicts that, despite well-publicized financial difficulties at industry leaders Teligent and WinStar, and a largely business-oriented target market, the fixed wireless market will grow from less than half a million currently to nearly four million subscribers by 2003.

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