Retailers Put Standardless Modems on Sale

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Standards or not, high-speed Internet services took a few
steps closer to the mainstream consumer market last week.

In separate announcements, MediaOne said it will ally with
national retailer Circuit City Stores Inc., and SBC Communications Inc. detailed plans to
link with Dell Computer Corp., as both companies hotly pursue subscription revenues for
high-speed-data services.

MediaOne and Circuit City last week started promoting
proprietary "NetGear" cable modems from Bay Networks Inc. in 17 Boston-area
stores. A week ago, Circuit City ran its first MediaOne Express ads in its local Sunday
circulars.

And as evidence that DSL (digital-subscriber-line)
offerings are catching up with cable modems, SBC said it will promote Dell's sale of
desktop personal computers equipped with asymmetrical DSL modems to certain SBC customers
in California.

Both deals are meant to keep high-speed modems in the minds
of consumers while they're already engaged in shopping for new PCs.

The retail move shows one thing loudly and clearly: Vendors
are not waiting for the ongoing cable-modem-standards-certification process to produce
compliance before stepping ahead with retail products.

Cable Television Laboratories Inc., as the current shepherd
of the DOCSIS (Data Over Cable Service/Interoperability Specification) project, has set up
a monthly deadline by which vendors can indicate their desire to undergo a battery of
compliance tests. The goal: a DOCSIS-certified sticker.

In August, General Instrument Corp. and Cisco Systems Inc.
became the first two manufacturers to sign up for the tests. Neither passed.

Two weeks ago, in the second round, five more vendors threw
their products into the testing ring: Toshiba America Consumer Products, 3Com Corp., Bay,
Samsung Telecommunications America Inc. and Thomson Consumer Electronics.

On the surface, cable operators, DOCSIS officials and
cable-modem vendors remained confident that there will be interoperable, standards-based
modems available in stores by Christmas.

But MediaOne -- which is pressing to get modems off its
balance sheets and into a consumer-pays model -- underscored an industrywide desire to get
on with it while the standards-compliance engine throttles up.

"We clearly believe that the arrival of standards by
the cable industry will open the door to much more retail interest and exposure,"
said Tom Cullen, vice president of Internet services with MediaOne.

In the meantime, the Circuit City test gives MediaOne the
opportunity to test its retail marketing model on a fairly broad basis in New England,
Cullen said.

MediaOne has also implemented retail cable-modem offers on
a more limited basis in metropolitan Detroit, Florida and Los Angeles.

Seth Morrison, vice president of marketing for CTAM, the
cable industry's marketing trade organization, said it's not too early for cable operators
to start building relationships with retailers. He added that in its deal with Circuit
City, MediaOne is "getting a head start on an important tactic" by learning how
to deal with multiple locations and retail point-of-purchase materials.

According to Cullen, MediaOne worked with Circuit City to
create a retail end-cap display that includes a PC with a CD-ROM demonstration of the
MediaOne Express service. MediaOne plans to install the cable-modem service where it is
feasible, probably in at least one-half of the Circuit City stores.

The Yankee Group analyst Bruce Leichtman said there was
nothing like seeing a product demonstration to move the technology forward. The challenge
at retail, he added, is making sure that salespeople feel that it's worth their time, and
that consumers are not "kicking the tires."

This becomes more of an issue as the prices of cable modems
are driven down. If the technology tracks the cellular-phone model, and the service costs
more than the hardware, cable operators may need to offer service commissions or other
incentives to keep retailers interested, Dataquest analyst Patti A. Reali suggested.

A big concern among several analysts was possible consumer
confusion over whether cable-modem service was available in their areas.

"A worst-case scenario would be for someone to buy the
product, take it home and find out that they're not served in that area," said
Michael Harris, president of Phoenix-based Kinetic Strategies Inc.

That's perhaps a bigger problem for DSL: Availability can
vary even within a given neighborhood, depending on distance from a telephone company's
central switching office.

"Cable modems have an advantage in that they're more
widely deployed," Harris said. "The pressure is on the telephone companies to
keep up with ADSL."

Dan Roe, director of business DSL for SBC, said the
company's DSL service is available through 87 central offices serving 4.4 million
consumers and 650,000 businesses.

He added that Dell's sales agents will be able to check an
online database of addresses to see if a potential customer could be served with DSL.

Dell is also talking to 3Com about an integrated
PC/cable-modem product, which is expected to be available this year, sources familiar with
the talks said. Dell and 3Com officials declined to comment.

Tim McElgunn, DSL analyst for Dataquest, said the accuracy
of that SBC database is crucial.

"If I ended up with an invoice for a Dell computer,
and I was then told by SBC, 'Sorry, we can't qualify your line,' I'd be real upset,"
McElgunn said.

SBC plans to start a direct-mail campaign to businesses
this week to let them know about Dell's factory-installed ADSL modems. Roe said the
company will measure the success of that campaign before it starts a consumer marketing
effort early next year.

SBC is looking to partner not only with other PC
manufacturers, but also with Internet-service providers, Roe said. He hopes that standards
for DSL modems will be ironed out next year.

DSL service, however, is generally more expensive, and
slower, than cable-modem service.

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