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From...
Wiring the suburbs – one cable box at a time
August 27, 1998
Web posted at: 1:15 PM EDT
by Michelle Rafter
(IDG)
-- Alberto Algernon peels open the door of his white Cox Communications
van and pulls out two toolboxes, one for cable TVs and one for computers.
He grabs a work order and heads for customer Nir Rahamim's front door.
Unlike Jim Carrey's sinister movie character, Algernon is the cable guy people love to see. His arrival means that within hours they'll be logging on to the Internet over a high-speed cable TV line and cable modem hooked up to their PC.
It's late Monday morning, and Algernon is parked in front of a townhouse complex in Tustin Ranch, a suburb in affluent Orange County, Calif., where Cox controls the cable TV market. Rahamim has been waiting since breakfast for Cox's technicians to arrive, but he doesn't complain too much. He's been waiting a lot longer for Cox to begin offering cable-modem service in his neighborhood.
"The deal is too good to believe. For the same amount of money I've been paying, I'll be able to go so much faster. And I don't need a second phone line," says Rahamim, a self-employed computer networking consultant who works from home. Rahamim is typical of cable-modem subscribers, who mostly use the service for personal or home-office use rather than for running larger businesses.
After Rahamim signs a few papers, Algernon and Cox technician-trainee John Bonebrake get started. They open the cable box in Rahamim's garage and pull out the line they'll be using for the cable modem. Then they remove a filter so computer data can travel back and forth to an IP connection at a Cox hub in Tustin, one of four data facilities the company has built in Orange County. From there it moves onto the broadband network run by At Home, which acts as Cox's ISP.
Back inside the house, the technicians make sure the network card in Rahamim's computer is compatible with the Motorola cable modem they'll be installing. Bonebrake attaches a splitter to the coaxial cable running out of an outlet in Rahamim's home office and attaches a second line that runs to the PC. He hooks up the cable modem and sets the book-size device on top of the computer.
The entire process takes under two hours. By the time the technicians pack up to leave, a smiling Rahamim is already checking out how fast he can reach his favorite Web sites.
Such scenes are being repeated across the country as cable TV operators begin aggressively selling Internet access to the home market. In two years, Cox, an early leader, has signed up 12,000 customers in Orange County alone – a 6 percent penetration rate. It has 22,000 additional customers in seven other metropolitan areas and has spent $1 billion over the past four years upgrading its cable lines to handle voice, data and video traffic.
The investment is beginning to pay off. In the second quarter of 1998, Atlanta-based Cox reported $4 million in Internet-related revenue – a drop in the bucket, but a definite start. More than 250,000 U.S. households are currently connected to the Internet through cable modems, according to Kinetic Strategies. The research firm expects the number to reach 500,000 by year-end, a five-fold increase from 1997.
Compared to the 65 million U.S. families who subscribe to cable TV, the numbers are tiny. But at current installation rates, they won't be for long.
Kinetic Strategies reports that North American cable-modem operators are now adding more than 1,000 new subscribers per day. Road Runner, an At Home rival jointly owned by MediaOne, Time Warner, Microsoft and others, has seen its affiliates' cable-modem customer base jump from 8,000 to 100,000 in two years. In some cities, cable operators have signed up 9 percent of their cable TV customers for Internet service, surpassing only America Online as an ISP in those areas, according to Michael Harris, president of Kinetic Strategies.
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Over the long haul, the broadband access that cable modems deliver could significantly alter how companies function on the Web, as sites add video, teleconferencing and other graphics-intensive applications. But companies needn't start changing their online strategies just yet. Despite substantial growth in cable-modem subscribers, it will be years before broadband delivery is the norm.
All this activity is happening in spite of cable modems' relatively high prices compared to traditional dial-up connections. It's common to pay $40 a month for Internet access and equipment rental, as well as a $100 installation fee. Other hindrances include the absence of standardized equipment and the overall sluggish pace of cable-system upgrades to handle digital data.
But these obstacles are quickly disappearing, and industry insiders hope 1999 will be a breakthrough year for cable modems. Dozens of chipmakers and modem manufacturers currently are testing devices based on the so-called DOCSIS cable-modem protocol, and they expect to have products incorporating the standard in cable operators' hands by the fourth quarter of this year. External cable modems should start showing up in retail stores soon after that, with prices dropping from $400 to $200 or less over the next year.
Recent mergers and acquisitions mean more money will be flowing into rebuilding the infrastructure of the nation's antiquated cable system. AT&T's pending acquisition of TCI, the country's largest cable operator, should speed up what has until now been a laggard upgrade schedule. Comcast got a similar shot in the arm earlier this year when Bill Gates sunk $1 billion into the company. Microsoft cofounder Paul Allen has entered the cable TV business, as well, with recent acquisitions of Marcus Cable and Charter Communications. Marcus expects to begin offering Internet access in its Wisconsin systems this month.
Although cable operators are spending most of their time courting residential customers, they haven't completely ignored the workplace. At Home's year-old At Work division is helping several cable operators, including Comcast and Cox, sell corporate America on cable-modem service as an alternative to commercial ISPs and DSL. MediaOne offers a similar service in Los Angeles and parts of Florida, Massachusetts and New Hampshire.
But not everyone is sold on the idea. Art Casanova, another Tustin resident, signed up for Cox's home-Internet service as soon as it was available in his neighborhood, but didn't even consider it for the architecture firm where he manages a 100-PC network. "It just hasn't been around as long as some other ISPs," he says.
Even so, cable operators aren't too worried about the competition – at least not yet. Most phone companies are still testing DSL, and standard-setting continues to trail the development of cable-modem protocols. And in areas where both services are available, cable modems deliver faster speeds for less money. The average cable modem delivers speeds of up to 1Mbps, compared with an average 256Kbps for DSL (although speeds up to 8Mbps are available).
"If the [telcos] keep dragging their feet, the early adopters will be all locked up," Harris says. "Trying to switch a happy cable-modem customer is a losing proposition."
Cable-Modem Access at a Glance
| COMPANY | EXISTING CABLE TV SUBSCRIBERS | HOMES WHERE CABLE MODEM SERVICE IS AVAILABLE | CABLE MODEM SUBSCRIBERS | PARTNERSHIPS |
| Time Warner Cable | 11.9 million | Not disclosed | 60,000 | RoadRunner |
| MediaOne | 5.1 million | 1.5 million in seven states | 41,000 | RoadRunner |
| Shaw Communications | 1.5 million | 1 million in six Canadian provinces | 40,000 | At Home |
| Cox Communications | 3.4 million | 1.7 million in eight major metro areas | 34,263 | At Home |
| Comcast | 4.5 million | Not disclosed | 28,000 | At Home |
| Rogers Cablesystems | 2.2 million | 1.7 million in two Canadian provinces | 20,000 | At Home |
| TCI | 13.1 million | Not disclosed | 10,000 | At Home |
| Cablevision Systems | 2.8 million | Not disclosed | Not disclosed | At Home |