Cable Failures are DSL's Opportunity

In rural North Texas, one Internet startup complains of inadequate cable broadband service. Complacent cable companies, unable to provide even the barest minimum of customer service, may be surrendering the market to hungry DSL providers.

by Patricia Fusco
of internetnews.com
[June 6, 2000]

North Texas is like a lot of other areas in the nation that are experiencing rapid growth in demand for high-speed Internet services for both home and business use.

Customer Relations Management (CRM)
Cable firms are discovering that Internet customers are more demanding than cable TV customers. Businesses don't fail when TV goes down, but businesses do fail when broadband service goes down.

Telephone companies know that phones are an important part of peoples' lives, and phone companies have always relied on customer service. (And telcos are exposed to more competition than cable companies.)

On the other hand, cable businesses minimize contact with customers, and cable companies have no CRM (Customer Relations Management) expertise. Cable modem connectivity may be popular now, but telecom companies and Internet service providers are better able to deliver high-speed Internet access with the personal customer service that broadband subscribers demand.

SOHO alone
Software developer Randy Dryburgh operates Calista Technologies out of his home office in North Texas on eight networked computers joined to the Internet through AT&T@Home cable services.

When Dryburgh's cable modem access goes down, so does his business, and the lack of broadband competition in North Texas means that AT&T@Home, a division of AT&T Cable Services, is a monopoly in his town.

Dryburgh said that AT&T@Home cable service has had intermittent disruptions since he signed on in September, but that the past week the broadband service was down from Friday through Monday.

"It started to go down Monday or Tuesday last week," Dryburgh said. "Sometimes technicians say it's a problem area, other times they say it's a router, or a hub. It's not a cable cut, and no one can tell me why my cable modem service is down."

The buck stops nowhere
Angel Biasatti, AT&T (NYSE:T) spokesperson, said Dryburgh's claims were completely unfounded.

"We serve 37 communities in North Texas and his claims are unfounded," Biasatti said. "We are up right now, but we did have periodic downtime last week when technicians replaced a server. Everything is up and the e-mail problem is resolved."

Biasatti added that all cable companies in the area were experiencing the same problem, including Cox Communications, Inc. But Cox (NYSE:COX) could not confirm any regional cable service issues and Dryburgh was not just complaining about e-mail — his access to the Internet was completely denied.

AT&T delivers cable broadband services to the region through its partnership with Excite@Home. Allison Bowman, Excite@Home (NASDAQ:ATHM) spokesperson, said the network did have some issues last week but that there were no outstanding service tickets in Texas at this time.

"Last week we had a server issue and we called in the manufacturer to replace it," Bowman said. "It was not an e-mail server though, it happened early last week and all service issues were resolved by Wednesday."

It's not the injuries, it's the insults
Dryburgh said he understands that cable access is not perfect, but the customer runaround he gets when reporting downtime is motivation enough to make him to want to switch broadband providers.

"I spent four hours total on the phone and not one customer service representative or technician has ever returned my call," Dryburgh said. "I've had AT&T@Home service at two different locations after moving from an apartment to my home. It's not the downtime that aggravates me, but the runaround I get when I'm trying to get a credit for downtime and have to face AT&T's 'prove it' challenges. I'm switching as soon as I can get DSL service."

DSL opportunity
GTE Corp. is working to deploy digital subscriber line services to the North Texas region. While SBC Communications, Inc. (NYSE:SBC) delivers telecom and Internet service in Dallas, much of the surrounding suburbs are served by GTE (NYSE:GTE) and GTE Internet.

Bill Kula, GTE spokesman, said he lives in Plano and is quite familiar with customer demands for high-quality broadband services to the area.

"In 1970 Plano consisted of 17,000 people, cotton fields and rabbits," Kula said. "Thirty years later, Plano is a thriving city with 230,000 people and no more room to grow. I'm 13,900 feet away from a GTE Central Office and I have DSL service to my home. We can provision DSL services to 60 percent of North Texas, but ISDN is an interim solution for residents of North Texas that demand speed and quality customer service in the area."

Kula added that GTE is working to deploy additional DSL lines in Texas, and throughout the nation.

"By 2003 we hope to be on target to provide 80 to 85 percent of our service area with DSL access," Kula said. "Right now in Texas we serve approximately 2,000 customers with DSL access and have provisioned 650 CO's nationwide to serve a total of 7.5 million DSL customers over 11 million DSL-capable copper feeds."

Broadband is growing
According to independent research company the Yankee Group, cable industry consolidation and competition from local telephone companies will drive the U.S. market for residential high-speed Internet services to 3.3 million subscribers this year, and will reach 16.6 million subscribers by 2004.

According to the Yankee Group report, the installed base of domestic high-speed Internet subscribers stood at 1.4 million at the end of 1999, with nearly 80 percent of these homes using cable modems for access.

While the cable industry continues to lead the market over the next five years, its share of the total installed base of broadband subscribers will shrink to about 58 percent by the end of 2004 as local telcos make DSL services more widely available and splitterless DSL modems make it easier for consumers to self-install connectivity.

As DSL buildout gets easier. . .
Kula said GTE's DSL program for home use is very popular among its subscriber base.

"Right now more than 80 percent of our DSL orders are self-installed," Kula said. "Most of these connections from GTE or its 349 ISP resellers offering DSL services waive set up fees and offer the modem for free to consumers."

Cable buildout gets easier, too
According to Bruce Leichtman, director of the Yankee Group's Media & Entertainment Strategies practice, recent consolidation among large and mid-sized cable system operators will speed deployment of cable modem services.

"Prior to consolidation, the high cost of upgrading to two-way, cable-modem-capable infrastructure meant that smaller operators would be hard-pressed to make the transition quickly," Leichtman said.

On the DSL side, Leichtman believes that wider deployment and more consumer-friendly pricing options will make the telco-delivered technology more widely accepted in the next few years.

The business is part customer service, part connectivity
"Consumer data gathered for the report indicates that among consumers who were interested in receiving high-speed access, 30 percent said they would prefer to receive the service from their telephone company, while 20 percent favored their cable provider," Leichtman said. "Significantly, the remaining 50% said they still had no preference."

"No preference" means that customer service and connectivity are paramount in keeping high-speed customers from switching services as cable and DSL access goes head-to-head in more and more U.S. cities.

Leichtman said connectivity is a high-speed customer's first priority.

"Connectivity is number one, while speed, price and security round out the top four priorities for broadband users," Leichtman said. "Subscribers won't accept connectivity without customer service, the two must go hand-in-hand to keep customers from switching services."

—End