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Hard times for broadband

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This column originally ran in ComputorEdge on September 28, 2001
(Issue 1939, Computer Safeguards)

It was just a year ago that the future of home broadband Internet connectivity seemed assured. DSL was battling cable TV outlets for primacy, and in the battle for home subscribers, consumers were the winners as prices kept dropping.

Now, though, it appears that as prices dropped, broadband Internet service providers weren't spending enough time watching the bottom line. To wit: several of the most prominent broadband startups have or are threatening to go out of business. Broadband service is increasingly falling into the hands of the telephone monopolies, and prices are once again rising.

Northpoint was the first major DSL player to go belly-up. When Northpoint went under earlier this year, it left tens of thousands of subsc ribers high and dry (including your increasingly bitter correspondent). Many local ISPs that had contracted with Northpoint switched their customers over to Rhythms. While Rhythms was far more expensive than Northpoint was, the assumption for many was that the higher prices reflected a more realistic business strategy.

Alas, Rhythms is now in bankruptcy proceedings.

Into the DSL void stepped SBC, a branch of the Baby Bell network that is taking the lead on broadband connections via the telephone network. But local ISPs who have contracted with SBC have now filed a lawsuit in California alleging that SBC intentionally drags its feet on hooking up customers from independent ISPs, and then contacts those subscribers, offering to hook them up quicker if they leave their ISP and subscribe directly through SBC. A court will get to sort that mess out.

While I've been waiting for my local ISP and SBC to get my DSL back up (and that sentence has more acronyms than a Pentagon press conference on CNN), I've had friends ask why I don't simply switch over to my cable provider to get my broadband connection restored.

To be honest, I was actually leaning in that direction, despite my preference for DSL (the availability of static IP addresses for my home network being the chief reason for avoiding cable service). Was leaning that way until last week when Excite@Home, the broadband Internet provider for Cox, my local cable provider, announced that it may be going under shortly.

Now, if the @Home service can't stay solvent despite a subscriber base running into the hundreds of thousands, it makes you wonder just how stable the whole broadband market is.

To date, the competing RoadRunner service that provides Time-Warner cable subsccribers with broadband access seems to be in good shape, but so did @Home, Rhythms and Northpoint a year ago.

Which brings up the question of whether there really does exist a viable market for home broadband Internet connectivity. If $49/month isn't enough to stay in business, what is – and will the market bear it?

It may be that at this point, the technology is ahead of the economics. If folks aren't willing to pay what the real costs to provide broadband access, then we may have to wait until the infrastructure technology advances enough to lower those costs – or until computer technology provides a broadband application that is so alluring that we're all willing to pay to use it.