Cable Companies Spin The Web

In the Sydney slum of Redfern, known by locals as "The Block", Aboriginal residents inject heroin in the entrance of an abandoned building in this Aug. 10, 2000 file photo. Child sex abuse is rampant among Aborigines in remote northern Australia, a government report released Friday, June 15, 2007, said, blaming widespread drunkenness and the breakdown of traditional societies as among the root causes. AP Photo/David Guttenfelder

Cable companies are exploiting every advantage — and they have many — in trying to build on their commanding lead in selling super-fast Internet service to consumers.

Their strength in the race to deliver broadband service is illustrated by a cheeky ad from a unit of cable company Cox Communications, needling Internet competitors who have fallen on hard economic times and have stopped serving consumers. The ad asks: "Who unplugged the Internet?" and "Is your DSL provider taking you to the InterNOT?"

Many upstarts offering fast Web access over souped-up phone wires — called digital subscriber lines, or DSL — have faced serious financial woes in recent months, some going out of business.

Cable companies, meeting in Chicago this week for their annual convention, have moved aggressively to pick up the pieces.

When a Wisconsin Internet business stopped providing service, Charter Communications cable offered disconnected customers a chance to subscribe to its Internet access "without any pain," says Charter president Jerry Kent. That meant giving significant discounts, so customers could switch over seamlessly, he said.

Cox Communications offered to install its service for free for consumers left without their DSL service. Cox says it has seen call volume go up by as much as 100 percent in two of the markets where the "unplugged" ad has run.

"There is a ripe playing field here for cable operators to take advantage of," said Michael Goodman, senior analyst with the Yankee Group, a consulting firm.

Cable already is well ahead of its telephone, satellite and wireless rivals in snagging customers. Goodman cites several reasons for cable capturing the lead: the industry has benefited from its first-to-market advantage, more widespread availability, better prices, easier installation.

Cable is also a known quantity, said AT&T Chairman C. Michael Armstrong, who heads the nation's largest cable business.

"There is a certain amount of uncertainty in the communications industry," he said. And "the flight to certainty is to AT&T's advantage."

Cable companies already enjoy a comfortable lead in offering high-speed access, with 4.7 million customers in the United States, according to the Yankee Group. About 2.2 million people subscribe to DSL service from a phone company or other Internet provider, while 98,000 customers hook up to high-speed Internet via satellite.

Still, some cable operators warn against resting on past successes or discounting the power of rivals. The nation's four Bell companies, delivering DSL service over phone lines, remain in a prime position to capture customers in their markets.

"There are very large local telephone companies with very deep pockets," said Mike Luftman of Time Warner Cable, which has more than 1.2 million high-speed Internet customers.

Goodman agrees cable companies can't let their guard down. "I don't think DSL is going away," he said. "There is clearly a market ut there."

Cable Internet service bypasses 60 million homes, according to the industry, meaning tens of millions of people could still sign up.

After investing billions of dollars to upgrade their cable lines so they can offer two-way services, companies are being aggressive in pursuit of new customers.

Comcast Corp., for one, is selling 5,000 to 10,000 new Internet subscriptions a week.

"When our industry started making investments, there was tremendous skepticism about whether this was going to work," said president Brian Roberts. But when it comes to the Internet, he said, "People are addicted to speed and having it always on."


By Kalpana Srinivasan
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  • CBSNews.com staff CBSNews.com staff

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