Sending large amounts of data down the narrow copper wires that make up the majority of the world's telephone networks can be a slow and expensive process. But cable companies, with their high-bandwidth fibre-optic and coaxial lines, are now being viewed as potential saviours for fast Internet access. For more than a year now, cable companies in the UK have been talking about becoming Internet service providers (ISPs) and testing cable modems capable of speeds up to 300 times faster than their analogue counterparts, but so far, no-one has made any ground-breaking announcements.
So, are cable companies serious about providing Internet services or is it just a gimmick to boost sales of TV and telephony products? What are the chances of cable customers being wooed by free call access? And will cable modems have an impact in the UK?
There are 16 major cable operators and 150 franchises in the UK today. The Independent Television Commission (ITC), the cable industry's regulatory body, estimates the number of homes and businesses 'passed' by cable companies to be 7.8 million, while 2.3 million are actually connected. The spread of cable has grown from zero to 22 per cent of homes passed in only six years, and if phone and TV penetration are added together to allow for the people who take both products, cable is connected to 30 per cent of the homes it passes. The industry's trade body, The Cable Communications Association (CCA), has estimated that by the year 2000, 16 million homes will have been passed by cable lines - that's 80 per cent of the UK.
Despite this, the country's cable operators have been slow to react to the consumer Internet market and it is only within the last year that three of them -Telewest, Cable Internet and Nynex - have begun to unveil Internet strategies.
Telewest, the UK's largest cable operator, has four million potential customers scattered across 26 franchises and in May 1996 it launched Cable Internet (www.cableinet.net), an ISP with a 28.8Kbps frame relay network and a 45Mbps link to the US. By November 1996, the service provider was rated in an independent survey as one of the top-performing providers in the country,ahead of BT Internet, CompuServe, Netcom,Demon and Pipex, and was one of only seven companies to achieve a 100 per cent connection rate. It was also ranked in the top three for download speeds, which were measured by downloading information from three of the busiest sites on the Internet. In December 1996, a partnership with Cable London to provide 5,000 of its residential telephony customers with Internet access was announced and a full launch is scheduled for this year.
Cable Internet completed its initial cable modem trials in Basildon in July 1996. John O'Sullivan, Cable Internet's group product manager, is confident the company will have up to 20,000 LAN City or Motorola CyberSurfer cable modems available to subscribers by the end of 1997. A rollout is planned to hit in the spring, franchise by franchise. It's a bold claim but O'Sullivan insists he is not being unrealistic. 'A lot of forecasts have been made about the impact cable modems will have and most are way off the mark. 20,000 is a reasonable estimate,' he says.
I'm with the brand
Another player jostling for position in the Internet market is CableTel, the UK's eighth largest cable operator, which has 15 franchises under its control. Unlike Telewest, CableTel sells wholesale through its ISP Cable Online (www.cableol.net/) to brand-name companies, and manages their Internet services for them. High-profile partners include Which?Online, Chambers Online, an ISP for chambers of commerce in the UK, and Richard Branson's recently launched Virgin Net, which will begin a 150-cable modem trial in Luton and Cardiff sometime in 1997.
According to Jag Sanger, marketing director at Cable Online, having brand partners makes sense because newcomers to the Internet 'need a service with a name they can recognise and feel good about'. CableTel's goal, he says, is to guarantee 'first-time connection every time' by mid to end 1997, and to be the number one service provider for business in the UK. 'If the Net is really going to take off, it must be as reliable as a car or a washing machine,' he says. 'It's got to work every time.'
Nynex (www.nynex.co.uk), the third largest cable operator in the UK with 16 franchises, made its Internet ambitions clear when it launched Home Surfer in December 1996. In return for a monthly fee of #1.49, users get up to a third off all calls made to their nominated ISP, provided it is on a Nynex-validated list. If the ISP is on the list, and their POP uses Nynex telephony, the full 33 discount off all calls kicks in. If the POP does not use Nynex telephony, the user gets a 10 per cent discount.
Nynex has also announced plans to undercut BT's ISDN prices significantly, with the launch of its own Basic Rate ISDN services. It argues that BT has been overcharging for ISDN2, which is equivalent to Basic Rate ISDN.
Nynex has said it will charge customers a #285 connection fee plus rental at #66 per quarter. Now in its initial phase, the service is only available to businesses which fall within the Nynex franchises although is expected to be offered to all Nynex business customers by summer 1997. As an added incentive, all business customers get a 33 per cent discount off all calls to the Internet.
Meanwhile, cable operator Cambridge Cable (www.camcable.co.uk) and ISP PSINet teamed up last September to provide companies in East Anglia with leased lines at discounted prices. The linkup gives discounts of up to 12.5 per cent of the normal PSINet charge to companies which require a managed, full-time Internet connection. The discount is available for companies which fall within the Cambridge telephone area (10223) and can be served by Cambridge Cable. For other Cambridge Cable areas, discounts of 7.5 per cent are available. Annual charges for 64Kbps to 2Mbps leased lines begin at #7,350.
All this activity is taking place in the background of other significant changes in the cable landscape. A proposed merger in October between Cable & Wireless, Nynex, Videotron (www.videotron.co.uk/main.htm) and Mercury promises interesting developments for Internet, provided the plans are ratified within six months. Dick Brown, CEO of Cable & Wireless Communications, as the consortium is to be known, has made it clear that he intends to wrest telephony customers away from BT and has made no secret of the importance of voice, data and Internet services.
The core business
But if the cable companies have been slow to react to the promise of the Internet, Cable Internet's O'Sullivan believes there is a reason. 'It comes down to what the core business of cable companies has been,' he says. 'Since the early 90s, the core has been selling very heavily on TV and telephony products. We're only now starting to look at the Net and see it as a core service for 1997. The first path is to build franchises and dig roads. Most cable companies haven't finished doing that, so that's where most of the resources go.
'Having said that, any company which has a good service and content by 1997 will be in a strong position to take advantage.'
John Davison, a senior analyst at Ovum and co-author of the report Cable: the Emerging Force in Telecoms and Interactive Markets, believes that events abroad will translate into activity in the UK but more slowly than the US and Australia, where national broadband networks are nearer completion. UK cable companies, he predicts, will adopt a cagey approach, learning from the mistakes and trials of their US counterparts. 'In the short to medium term, cable operators will be leveraging the telecoms infrastructure they've already got. They need to make some money back on that before they start investing too heavily in new technologies,' he says.
But Roger Wilson, editor of the online magazine Inside Cable (www.gold.net/users/ek80/index.html), believes that the demand for higher bandwidth coming out of graphics, co-operative work and video telephony has seriously fuelled the growth of ISDN for businesses. 'Cable companies originally had to make up their minds as to whether they would regard ISDN as a proper service. They've done that this year and the critical thing has been the duplex product,' he says. 'Cable companies have always been providing Basic Rate ISDN but the reality of duplex Primary Rate ISDN is that it conforms to European standards and that's been fuelling demand. Companies like Videotron, Telewest and Nynex are all certainly capable of providing this service.'
According to Wilson, the serious aim of the cable companies now should be to attract business customers. But where is the evidence to show that the cable providers are serious? 'You only have to look at the sheer scale of investment that's been made to get into the market,' he says. 'Plus, OFTEL quarterly performance measures now show that cable stands up very well in comparison with BT and Mercury in terms of customer support. Businesses are buying in increasing numbers. A number of cable companies now regard business telephony as their primary product when they roll out in a new area. I believe it will achieve great prominence. One of its strengths is that it is a national product, thanks to BT's ads.'
For heavy Internet users, the promise of cable modem access looks likely to remain a limited experience in the short term. Having a very fast modem is all very well, but the old adage that the Internet is only as fast as its slowest point still holds true. If you are trying to access a Web site on the other side of the world on a slow and cumbersome server, the service will inevitably be slow.
But even if the promise of cable modems isn't everything Internet users hoped it would be, connecting through cable companies should still work out the cheaper option. If cable companies can guarantee high-quality service, it seems as though the prospect of Internet users migrating towards cable operators could soon become a reality.
Free, but for how long?
One misconception the cable companies seem keen to dispel is that cable Internet access will ever be free. In fact, Cable Online's Jag Sanger believes the free Internet access offered by Videotron and Nynex was a mistake rather than a planned policy. 'When the Internet took off, a lot of computer people set up as ISPs and some bought their connection to the Net from cable companies,' he says. 'They found the cable companies would accept free Internet use for cable to cable telephone users and cable companies went along with it in the spirit of customer service.
I don't think it will last.'
Videotron won't confirm how long it will continue to offer free Internet access through the five ISPs that buy connections from it, but Nynex is '90 per cent' certain that Community, its free Internet package for premium TV subscribers, won't last beyond 1997.
If the majority of cable companies are anything to go by, it looks as though free Internet access is a trend which is unlikely to continue.
Ian Hood, Cable Internet's marketing director, backs this up. 'One reason why we're not anticipating packages that allow free calls to ISPs is that many people just log on and stay on forever,' he says.
Evidence in the US, says Hood, shows that heavy Internet use is tying up telephone network resources. In Silicon Valley, which has a particularly high concentration of online users, telephone connection failure is mysteriously increasing. In October 1996, the US telecoms industry's regulator, the FCC, launched an inquiry to establish a link between extended Internet use and network failure. Intriguingly, its quarterly report in the same month concluded that no phone carriers had reported an event linked to Internet use which met the criteria for 'reportable outages' - a network failure that deprives more than 30,000 customers of the ability to make a call for more than 30 minutes.
'It's one of those areas which is constantly under review but the fact is that no-one should expect free access to a service,' says Hood. He contends that extended access and free local calls are primarily concerns for heavy users.
'The occasional user, who uses the Net for email, is neither here nor there in terms of phone charges,' says Hood. 'It is an issue for heavy users, who are best served by cable modem technology. Cable modems operate not over a telephone network but over a broadband cable TV network, so they don't put a strain on the network.'
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