Through cable technology that allows for high-speed connections and loosened federal communications industry regulations, cable operators are scurrying to get a piece of the burgeoning Internet access business.
DOZENS OF TESTS AFOOT
Although the cable modem technology has yet to be polished for mass deployment, there are currently more than two dozen tests being conducted nationwide by cable companies such as Cox Cable Communications, Comcast Corp., Jones Intercable, Tele-Communications Inc., Time Warner Cable and Continental Cablevision.
"Whatever cable modems are in place today will be exponentially multiplied within the next 12 months," says Michael Schwartz, VP-communications for CableLabs, an industry-funded cable consortium.
Forrester Research, a new-media consultancy, estimates the Internet access market will reach $4.5 billion by 2000.
Market projections for 1997, however, hover around $500 million. Forrester also predicts that 7% of U.S. households will use cable modems in place of telephone modems by 2000, up from 0.09% this year-which are being used primarily in trial markets.
"There's no doubt that the Internet is a growing market-looking at the increase in PC sales, or memberships to online services, or businesses setting up shop on the Web," says Rich d'Amato, senior director of public affairs for National Cable Television Association.
"Cable's [coaxial fiber hybrid] architecture is well-suited to the Internet and will allow for the speeds that so many consumers are looking for," he says.
Time Warner has been running a cable modem test called Linerunner in Elmira, N.Y., since last July. Although it currently has just 200 participants, Time Warner has ordered about 100,000 cable modems from Motorola and Toshiba. Time Warner's plan is to offer similar Internet access services in Akron, Ohio, and San Diego by next fall.
Additionally, Linerunner is working with Time Warner's publishing arm to offer local publication content and Time Warner material currently on the Internet, like its popular Pathfinder Web site (http://www.pathfinder.com).
$40 PRICE POINT
The Elmira trial, which eventually plans to charge about $40 per month to subscribers, has included content from Elmira's library and newspaper.
"Not only can we deliver people to the Internet at great speeds, but we can create a sense of community in doing so," says Glenn Britt, president of Time Warner Cable Ventures.
Local services and high-speed access obviously will be key selling propositions when Time Warner Cable begins marketing Linerunner on a larger scale, says Mr. Britt. Analysts say cable modems boast speeds that are sometimes up to 400 times faster than traditional dial-up copper lines offered by phone services, and about 80 times faster than an ISDN connection-a high-speed digital connection service marketed primarily to businesses.
Mr. Britt says Linerunner is aiming to be in 40 markets, with a total of 18 million prospective customers, sometime beyond the year 2000.
TCI is also readying a launch into the Internet access market with a product called @Home, a joint venture of TCI Internet Services and venture capitalist Kleiner Perkins Caufield & Byers, that plans its debut this summer in Sunnyvale, Calif. The company is still working on building the technological backbone of the service, which @Home one day hopes to market to its cable subscribers nationwide. TCI has already purchased about 200,000 cable modems from Motorola.
Initially, though, @Home is targeting about 25,000 residents in the San Francisco Bay area and plans to charge about $40 a month for unlimited access, including a monthly lease fee for the cable modem.
ADDING CONTENT ENHANCEMENTS
@Home has formed content agreements with the online sites of Learning Channel, Discovery Channel and c/net: Computer Network; @Home also will integrate local services.
Although it seems Internet access is an obvious new business for cable companies, there are obstacles such as price. Cable modems cost between $300 to $750-a price point most observers think is beyond consumers' comfort zones.
"There will never be a critical mass of consumers who'll be willing to pay $300 for a modem-even if it's broken down in a monthly bill," says Peter Krasilovsky, a consultant with Arlen Communications.
BOSTON COLLEGE WIRED
Still, operators remain bullish on the notion. Continental Cablevision has wired Boston College with cable modems, providing high-speed Internet access to about 5,000 students and faculty at the Massachusetts university. Additionally, Continental has currently partnered with Boston-based Internet provider BBN Planet to run a cable modem test for about 200 people in Boston.
"There's already a great number of people who are Internet savvy who are simply looking to make the transition to higher transmission speeds, and that's what we'll be offering," says Rob Stoddard, director of corporate communications at Continental.
With the inevitable mergers and acquisitions among communications companies-including U S West's pending acquisition of Continental-Mr. Stoddard adds that many telecommunications and cable companies will be partnering, creating "tremendous synergies" for services.