Frankly, Will Modems Fly off Shelves?

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Whatever the outcome at this week's "Cable Modem
Retail Forum" in Chicago, benevolently sponsored by Motorola, the ultimate test of
modem marketing will come at checkout counters around the country -- computer stores,
electronics stores, specialty stores to be opened by cable operators, and maybe all of the
above.

Indeed, where to sell remains the first decision
confronting vendors in the soon-to-be-competitive world of high-speed access.

Despite the remarkable fast pace of current cable-modem
installations -- up 39 percent during the third quarter of 1998, and now standing at
nearly 500,000 homes nationwide -- there's plenty of reason to fret about the next rollout
phase, and especially about the retailing of access devices.

One barrier is the simultaneous avalanche of new products
competing for the same consumers' attention and investment. One solution: Spiff the store
clerks to push your products. But, as a General Instrument executive (with previous
TV-set-marketing experience) acknowledged recently, that bounty to sales-floor staff works
only for a short while. And, as the hardware deluge attests, these front-line personnel
may themselves be dazed by the array of complicated new products.

For example, DVD (including Divx), digital TV in all of its
variations and a slew of computer upgrades and peripherals are competing for the attention
of early adopters. At Dow Stereo/Video and Good Guys stores in California recently,
knowledgeable salesmen warned me away from buying first-generation Divx or HDTV equipment.
One clerk, noting that Divx may be dead by spring, warmly reassured me that the $399 Divx
player that he was demonstrating could still be used for DVD and CD audio. He stopped
short of offering me a strip of duct tape to cover over the Divx logo.

We may be nearing the day when almost every middle-aged
John, Tom, Linda or Ellen can surf the Web without help from a pubescent offspring.

But first, they have to know what to bring home.

Product introductions are outpacing the capacity of
computer/electronics dealers and cable operators to absorb them. It's definitely too fast
for consumers.

And don't forget about the positioning of cable-modem
products. Will they be relegated to the geek corner at the electronics emporia? And who
will explain why a $300 high-speed modem is a "bargain," when barely one-half of
PC users have surfed at faster than 56 kbps with a modem that was "free," built
into their PCs?

Meanwhile, the attempt to capture mind and
high-speed-market share is already under way. Bell Atlantic wasted no time last month in
sending direct mail about its "InfoSpeed"
asymmetrical-digital-subscriber-line service to target customers -- even though only a
handful of central offices can deliver the service, which is being turned on this month.

Savvy users know that more digital options are on the way,
and they expect "more" to mean "faster, cheaper, better."
Small-office/home-office (SOHO) users -- probably the best target customers for high-speed
access -- are likely to scan publications that tease them about what's ahead:

DirecPC -- Hughes' high-speed-data
cousin to DirecTv -- is about to upgrade its satellite-to-home service in early 1999.
(Current versions are on sale at CompUSA.)

@Home
is already talking about bringing its high-speed online service to the TV set, in
collaboration with Network Computer Inc.'s set-top technology.

CatchTV, an entrepreneurial
venture, will bookmark Web sites when they are integrated into TV programs -- again on the
TV screen.

• Next-generation WebTV
boxes are being heavily promoted, and 500,000 current users can attest to that experience.
(It's worth noting that WebTV has two-dozen retail specialists spot-checking stores
nationwide to assure that demos are working properly.)

• At last month's Japan Electronics Show, JVC
demonstrated a prototype "Information TV" with built-in modem
and hard drive.

• Not to mention Wink, WorldGate
and whatever WebTV plans to offer next.

Consumers may find it easy to postpone a cable-modem
purchase -- especially if it's expensive or hard to see a demonstration -- with so many
alternatives just ahead.

There's no avoiding the hard retailing realities -- shelf
space, brand names, collaborative marketing between cable operators and stores. These are
obvious. The unspoken challenge -- nay,temptation for dealers -- will be to
attract customers without letting them become distracted by higher-margin or more
appealing products that are easier to sell.

The really meaty issues of electronics retailing -- gray
markets, end-cap displays, co-op ads -- are just beginning for cable-modem impresarios.
Let's hope that they aren't planning vacations anytime soon to take off in the blue.

I-Way Patrol columnist Gary Arlen awaits the opportunity to
relyricize, in a cable motif, "It Was a Very Good Year
."

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