Cable Modem: The Big Daddy Of Data Haulers?

The devices on the horizon will easily outspeed ISDN

Stand back when Bill Manuel of Horseheads, N.Y., uses his link to the Information Highway: It's a fire hose. His computer is hooked not to his phone line but to his coaxial television cable, in a technology trial by the local unit of Time Warner Cable. Now, the few times he uses his regular phone modem feel like visits to the Stone Age. Says Manuel, the computing technology director at Corning Community College: "Some downloads take 1 1/2 hours that might take two minutes at most on the cable. It's amazing to start a download with the old modem, go eat dinner, read a newspaper, go back upstairs--and it's still not finished."

Cable modems are still exotica. Only a few thousand people are using them today in trials by cable operators in the U.S., Canada, Japan, and Europe. The nonstandard, first-generation boxes are generally leased, not sold. Aside from that, perhaps 90% of U.S. cable customers are served by networks that can't yet handle two-way data communications. It will be 1997 before a new generation of internationally standardized cable modems will go on sale. And cable operators still must spend billions of dollars to upgrade their networks. The result: Forrester Research Inc. predicts about 6.8 million U.S. homes will have cable modems by 2000.

VIDEO-RICH SERVICES. The mere advent of the cable modem is spurring dramatic improvements in how people tap into the Internet and telecommute (table). The phone companies' ISDN digital-phone-line service is much slower than Manuel's cable link, which handles 4 megabits of data a second. But ISDN, the integrated services digital network, has a headstart and is growing at healthy rates after a decade of being stuck in neutral (box). ADSL, or asymmetric digital subscriber line, can squeeze still more speed than ISDN out of conventional phone wires over short distances. Some well-heeled Net folk are even spending $350 and up monthly for so-called T1 phone lines that handle 1.5 megabits per second. (Manuel pays $25 a month, and an ISDN line might run $50.) Also competing to rain data down on homes are satellite operators such as Hughes Network Systems Inc., whose DirecPC service sends information to two-foot-wide dishes at ISDN-like speeds.

Breaking the data bottleneck will help the entire computer industry. For one thing, it will boost providers of online information and entertainment. The World Wide Web, whose pages are kept fairly simple now to limit download times, will be capable of carrying far more sound, pictures, and video. The video-rich online service planned by Microsoft Corp. and NBC Inc., for instance, would be inconceivable without the prospect of a big jump in data rates to the home. No.1 cable operator Tele-Communications Inc. is counting on cable modems as on-ramps for Home, a joint-venture network under development with venture-capital firm Kleiner Perkins Caufield & Byers.

Faster transmission speeds to the home could trigger an avalanche of spending on new computer hardware. That's why Intel Corp. is one of the biggest supporters of cable modems and the like. Once the pathway to the home is widened, other bottlenecks will become more conspicuous, and pressure for upgrades will grow. For example, power surfers will hit Web sites even more often than they do now, forcing the installation of more Internet routers and servers to relieve the inevitable congestion.

Of all the new high-speed technologies, the cable modem has become the most likely to succeed. Cable operators have slowed down their ambitious plans to provide interactive TV, telephone service, and videoconferencing. Instead, they're focusing on the technologically simpler task of providing fat data pipelines. These don't require any costly telephone switches--just routers that look at the addresses on packets of data and send them off in the right direction. Plus, there's none of the regulatory difficulty associated with phone service.

As for the customer's side of the network, a cable modem is fundamentally no more complex than today's 28.8 kilobit-per-second modems. Although cable modems cost about $400 now in limited quantities, they should come down to about $150, says Mario P. Vecchi, senior vice-president and chief technology officer of Excalibur Group, a Time Warner-owned company that develops and deploys high-speed services. Cable operators already have placed big orders with such manufacturers as Motorola, Toshiba, Hewlett-Packard, and Intel.

"GLORIOUS SCENARIO." To offer cable-modem service, operators must fortify their networks with lots of optical fiber, while equipping the coaxial cable portion with new amplifiers that work in both directions, upstream and downstream. But the operators are making that investment anyway by spending roughly $1.5 billion a year to increase channel capacity and signal quality, and set the stage for interactive TV. Robert A. Luff, chief technical officer for broadband at equipment supplier Scientific-Atlanta Inc., estimates that networks capable of handling two-way cable modems could pass 40% or more of U.S. homes by 1998 and more than 60% by 2000. First to be wired, of course, will be the upscale neighborhoods that are most likely to sign up for high-speed data connections.

Rivals to the cable operators are taking advantage of the lull before cable modems hit big. Hughes's DirecPC service says it has orders for thousands of dishes, which can't double as satellite-TV receivers. Its best hunting grounds: rural areas with poor cable and phone service.

Meanwhile, phone companies are selling the heck out of ISDN, which converts standard analog phone lines into faster digital ones. Pacific Telesis Group says ISDN is its primary approach to providing high-bandwidth connections to the home for the near term. And Nynex Corp. recently predicted it would install 1 million ISDN lines in its territory by 2000. In addition to reaching the market ahead of cable modems, ISDN can handle phone calls and two-way videoconferencing, which cable modems are ill-equipped for. And as for data, the hope is that "they're going to see pretty good performance from ISDN, and they may not see as much of a need to upgrade," says Raymond F. Albers, Bell Atlantic Corp.'s vice-president for technology planning.

But if "pretty good" isn't good enough, cable modems look like a better answer. Even if ISDN's two 64-kilobit channels are bonded together, their combined rate is less than one-tenth the speed of a 4-megabit cable modem. And that's the floor for cable modems: Canada's Rogers Cablesystems Ltd. is seeking suppliers of models rated at a screaming 27 megabits per second. Zenith Electronics Corp. is talking about a 40-megabit version.

ISDN advocates like to say that cable modems can't actually deliver those speeds because the bandwidth is shared by 500 or more homes. Well, yes. If enough homes send or receive data at the same time, the network would slow down. But cable executives say it then would be financially worthwhile to add fiber to cut down the number of homes sharing a network segment. Says Time Warner's Vecchi: "That would be the most glorious scenario that we could think of: All those people out there clamoring for more bandwidth."

SCARY OPTION. The cable industry could still screw things up. One hurdle comes on Apr. 15, the industry's self-imposed deadline for coming up with the rudiments of a standard so any manufacturer's modem can be used on any operator's system. If negotiators come to be at loggerheads, they could stall the growth of cable modems the way ISDN was stalled for a decade by equipment incompatibilities. What's more, the cable industry must offer reliable service, especially for telecommuters whose jobs depend on their computer hookups. Asks Tom Bayless, director of ISDN for Pacific Bell: "Are you going to bank your business on a cable company?"

Cable operators insist this opportunity is just too good to blow. At December's Western Cable Show, Comcast Corp. President Brian L. Roberts called cable modems "one of the most significant developments in the history of our industry." Indeed, cable executives worry that phone companies will draw the same conclusion and start building coaxial cable into their own networks to offer speedier services. That, rather than ISDN, may be the phone-company option that most scares the cable industry. Pacific Bell is planning a small trial of cable modems in the San Francisco Bay area. Admits Pac Bell's Bayless: "If all you care about is fast Internet access, it's probably not a bad deal."

Whoever ends up building the Info Highway to your home PC, the days of waiting interminably for keystroke commands to be answered are coming to an end. And beware: Instant gratification will make the Net even more addictive.