Making The Net Go Faster, Faster, Faster
Robert E. Knowling Jr. understands there's no time for caution in the race to deliver ultrafast Internet access. So in June, the CEO of Covad Communications Group Inc. in Santa Clara, Calif., huddled with his top executives and challenged them to "just blow away" the company's already ambitious 51-city coverage plan. After two days of scribbling ideas on flip charts, they settled on a new plan--announced in early September--to reach 100 of the top U.S. cities by 2001, bringing split-second Net access to 40% of the homes and businesses in the country. Says Knowling: "This is about winning in the marketplace."
Hold onto your modem. Knowling's call to arms at Covad reflects a new urgency among Internet carriers across the country. In the coming months, telephone, cable, wireless broadband, and satellite companies will push harder than ever to reach customers thirsting for fingersnap-fast connections to the Net. SBC Communications Inc. is planning to pump several billion dollars into a four-year plan to extend well beyond its early goal of providing digital subscriber lines, or DSL, service to 10 million customers by yearend. The new target: 50 million customers within four years. Meanwhile, Bell Atlantic Corp. is accelerating its rollout of DSL service, aiming to double the number of customers, to 21 million, by early 2000. All told, by 2002, nearly 80% of U.S. households will have access to speedy broadband links, up from about 40% today, according to researcher Dataquest Inc.
CRUISING. Why the surge to speed? Demand. The percentage of households online will climb from 31% now to 54% in 2002, predicts market researcher NxGen Data Research. Fueling this demand is the boom in new devices that can cruise the Net--from WebTVs to palmtop computers. And Internet access providers want their share. That's why broadband carriers are rushing to deliver services and for the first time are getting ready to pepper the market with brand-building ad campaigns. "What's lighting up the interest is that companies are starting to understand just how powerful these new [broadband] networks can be," says Catherine M. Hapka, CEO of Rhythms NetConnections Inc., a DSL provider in Englewood, Colo.
So far, cable operators lead the broadband race. Strong in residential areas, cable companies have lined up more than 560,000 users to date, about half the entire broadband customer base in 1999, according to NxGen. But by 2001, that's going to change, and customers will have plenty of choices. Not only will the telecom companies grab a considerable share of the broadband market, but satellite services such as DirecTV and fixed wireless companies that beam data via radio waves, are expected to nab a chunk of customers, too. The upshot: telcos will dominate the business market, and cable operators will keep a narrow lead in the home.
That won't happen overnight. First, service providers have to upgrade their broadband networks. Today, only about 30% of the homes in the country are cable-modem ready. Cable companies have to transform old, one-way cable systems into robust two-way data highways. AT&T, owner of TCI, is spending $15 billion on its TCI cable system. Once the lines have been upgraded, cable services such as Excite@Home and Road Runner hook cable modems to the newly robust pipes and your PC.
Telephone companies are hot on cable's heels. In 1999, telco shipments of DSL gear, which splits voice and data signals and zaps them over copper-wire phone lines, will skyrocket more than 900%, to 400,000 units, says Strategis Group, a research firm in Washington. Like SBC and Bell Atlantic, GTE Corp. is pouring $25 million into its growing system this year. "If the existing service providers don't meet the growing need for speed," says Jeffrey M. Bolton, GTE's director of DSL programs, "other providers will."
That's why both cable and telephone companies are busy working to overcome the limitations of their networks. Cable pipelines are shared, making them sluggish when too many users crowd on. So cable operators are extending network gear deeper into neighborhoods, dropping the number of homes sharing bandwidth from an average of 1,000 to as few as 50, says Patti A. Reali, a cable analyst at Dataquest.
Telephone carriers are scrambling to find ways to deliver service to customers more than 3 miles from a central office. These offices store the DSL gear that opens up a high-capacity pipe for the delivery of data to the right homes, giving them an Internet connection that is always on. Beyond 3 miles, service is unreliable.
Simply put, the hinterlands are expensive for telcos and cable operators to reach. Enter wireless broadband. Satellite services DirecTV and EchoStar are beginning to beam a bundle of popular Web data to be stored on PC and TV set-top boxes. Companies also are installing radiowave towers that stream data to wireless receivers on homes. Sprint, for example, has spent $1.3 billion for speedy fixed wireless access to 30 million U.S. homes.
THE BIG GUYS. Carriers are turning their attention toward marketing campaigns and building richer services, too. Next year will bring a rush of print, TV, and radio ads. Covad will shell out nearly $50 million on a campaign dubbed "The Internet as it should be." "When all is said and done," says Robert A. Roblin, Covad's executive vice-president for marketing and sales, "this will be a game of who has the strongest brand."
True, but the heavyweights of this cutthroat contest will have to do more than promote their name. Improving the installation process is key. That's why Bell Atlantic unveiled a do-it-yourself installation kit in July. It costs $100, the same price the company charges to send service reps, but customers aren't forced to wait. Road Runner is testing a similar program for cable-modem hookups in Minneapolis. "Everyone in the world is too busy to sit at home and wait for someone to come by," says Bell Atlantic COO James G. Cullen.
So far, speed has been the big advantage of broadband services. But a handful of carriers believe customers will demand a greater array of services. Tomorrow's homes will put the Jetsons' to shame--with voice, video, and data flooding the dwelling. Sprint Corp.'s ION network, for example, is designed to allow phone calls and computer Web chats simultaneously. Sprint will unveil its ION network to consumers in Denver, Kansas City, and Seattle in December.
Richer services and faster connects are redefining how and where employees work. With traffic at a crisis point in California, employers are looking for affordable ways to let staffers work from home. Software maker PeopleSoft Inc. in Pleasanton, Calif., bought about 400 DSL links from SBC's Pacific Bell. Now, its employees can connect from home using a broadband program it calls "people pipes." At about $100 a user, the connections cut a tenth off the cost of traditional fast pipes offered by the phone company, says Neil P. Hennessy, PeopleSoft's director of global communications. "It hums big time," Hennessy says. As broadband carriers duke it out, companies such as PeopleSoft, and their employees, will be the real winners.
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