Summer Lessons: Speed, Money, Consumption


That ingrained habit from our youth-being ready to share summer experiences during this back-to-school season-dies hard. Here are a few of the things I learned this summer:

  • How Fast? The class-action suit about inadequate DSL service filed against SBC Communications should serve as a huge warning to cable-modem providers that similarly underdeliver.
  • Customers claim that SBC and its operating subsidiaries provide DSL services at access speeds far below promised-and paid-for-performance. The suit-filed last week in Nueces County, Texas-charges SBC with fraud, theft, breach of contract, unjust enrichment, monopolistic trade practices and gross negligence.
  • Plaintiffs specifically claim that they're paying for 384-kilobit-per-second access, but SBC deliberately restricts speeds for e-mail and newsgroups to 128 kbps. Moreover, the service automatically disconnects if users are idle, thus violating the "always-on" promise, according to the complaint.
  • Whatever the merits of this Texas suit-apparently the first such complaint about alleged high-speed incompetence, if not downright chicanery-the case is a vivid warning of customer rebellions yet to come.
  • For two years, I have been railing about the slowdowns and under-delivery of cable-modem service, especially due to the party-line architecture. Consumers and their lawyers are getting over the novelty of high-speed and turning to actual value.
  • When an industry promises 1.5-megabit-per-second delivery but merely provides 400-kbps service, geeks will notice. Early adopters might not care, marveling at the speed, but price-conscious customers will complain and bring their lawyers.
  • On the other hand, cases like this could become yet another access battle-ground as cable-modem and DSL forces conduct marketing and legal kilobit-upmanship. Indeed, a similar feud about actual speed is already the theme of SBC's Pacific Bell DSL ad campaign in California.
  • Or will that claim also become the target of a class-action suit?
  • What they don't know: Lawyers don't know everything. Now that I've told you something you already knew, let me give an example.
  • At a recent retreat for communications attorneys (i.e., golf and fine dining punctuated with a few thoughtful seminars on broadband developments), one session was devoted to venture-capital investments in broadband and similar high-tech communications services.
  • The excellent speakers not only summarized venture capitalists' current attitude toward Internet and high-speed initiatives, but also offered specific advice about their firms' approach to such investments.
  • Then it was time for the audience Q & A. Lawyer after lawyer arose to interrogate the panel, often asking very simplistic questions about the structure of venture-capital deals.
  • I was perched near the back of the room, sitting next to a former federal bureaucrat who is now practicing law in Silicon Valley. Our running commentary, sotto voce, about the questions mainly dwelled on how simplistic and naïve the lawyers' questions were. "This isn't a VC 101 course," my seatmate groused repeatedly.
  • But-and I can't believe I was defending the attorneys-I pointed out that most of these guys represent big media and telecom companies. These aren't firms that work on early stage ventures. Venture-capital funding was understandably new to them.
  • Of course, given the current nature of venture capitalism, the process is actually closer to investment banking, while true venture funding is being handled by angel and incubator investors.
  • Anyway, the fascinating dialogue was a reminder that high-priced counsel doesn't always know it all. It was better to hear these simplistic questions at a comfy retreat than when the meter is ticking. But it's also a warning flag for lawyer-bashers: Counsel is paying attention to the broad range of broadband activities, starting in the cradle.
  • Self-imposed barriers: Despite the glowing promises of e-commerce and the tangible results of a few emerging e-merchant princes, it's becoming clear why online marketing still faces formidable barriers-especially as it seeks to coexist with long-established bricks-and-mortar businesses.
  • Carriers hoping to cash in on e-commerce, such as via revenue sharing, may have to wait a while longer. Consumer behaviors such as online window-shopping (i.e., seeking information via the Web, but then going to a store to purchase) remain steady. And it's understandable why online shoppers-even Web-savvy consumers-remain concentrated in a few key categories.
  • My latest personal example comes from the competitive realm of online new-car purchases, a pioneering e-commerce category that should be stabilized by now.
  • For several recent weeks, I gathered information and requested bids about two specific models from nearby dealers. Although about three-quarters of the salesmen actually followed up, their online offers-actual solid deals-were slow in coming. Inevitably, negotiations required in-person appearances in the showrooms and continued negotiations, which resulted in deals substantially different than the online offers.
  • In other words, it would have cost me at least an extra thousand dollars for the convenience of an online purchase (although some of that would have been acceptable in order to avoid the slimes who eke a living in that business).
  • A few friends have said they consummated car deals entirely online, but those seemed to involve leases. My acquisition was complicated by a trade-in, the value of which varied by about 200 percent, depending on the dealer. Obviously, that meant real-world-not cyber-contact.
  • So the high-value auto category may not be as ready for online shopping as the plethora of e-tailers espouse, which must make those car salesmen mighty happy.
  • I think I'll write that lesson up for my midterm exam about the current broadband and new economy juggernauts, then get a lawyer to look it over before I turn it in.

I-Way Patrol columnist Gary Arlen will submit in proper blue-black ink an illustrated report on what he did this summer; further details appear in Broadband Week.