Tomorrow is Groundhog Day. If I see my shadow, you'll
all have to wait another six years to get broadband services.
Indeed, there is a huge shadow hanging over the high-speed
access business. It's so big that stunning rays -- like @Home's plan to take
over AT&T's WorldNet dial-up access service -- merely divert attention from the
real near-term Internet-access challenge.
No, it's not just telco's digital-subscriber-line
dreams: It's the inertia overhanging plain-old dial-up access.
More than one-half of America's 28.2 million
residential Internet users go online at speeds below 28.8 kilobits per second. If
they're still using the computer that they bought two or three years ago -- the one
with the built-in 28.8-kbps modem -- then they're likely to be online at the slower
Given the reality of dial-up connections, many of them are
connecting at significantlyslower speeds, some still using 14.4-kbps modems. And
they don't know what they're missing because their Web-usage patterns -- e-mail,
an occasional shopping splurge -- function just fine at that lazy pace.
No games or rich-media graphics for these mellow surfers:
Their $20 or $22 per month -- maybe less -- buys them all the speed that they want.
For this lethargic horde, it's going to be a tough
upsell into the costly high-speed world of DSL and cable modems. Indeed, the rush is on to
capture and keep today's base of dial-up customers, whether they are the true
slowpokes or the somewhat speedier crowd who has upgraded to 56-kbps service, which came
with the newer computers that they bought in the past year.
In that light, @Home's proposed takeover of AT&T
WorldNet's 1.4 million customers would merely mark the beginning of a very long
conversion process. Presumably, the vision involves access to a sizable throng that has
chosen to avoid America Online as the Internet-service provider of choice.
@Home's mission will be to tease this group with some
original content (including the newly acquired Excite portal) and to eventually coax users
to upgrade when (if?) cable modems come to their communities.
The @Home-AT&T WorldNet alliance is the latest in a
flurry of mergers among ISPs. It comes on the heels of AT&T's acquisition of IBM
Global Network, which includes the "IBM Internet Connection," a 1
And AT&T admits to ongoing talks with Microsoft Network
-- specifically, the MSN Internet-access service, which has been drifting around the 1.5
million-subscriber level. Assembling all of these users, plus @Home's 330,000
broadband users, would put the collective customer base close to 5 million customers.
That's still far short of AOL's 15 million
dial-up customers (and growing), but leagues ahead of any other dial-up ISP -- so far.
Here's the shadowy surprise: A year ago, the ISP
consolidation was expected to take place among the 3,000 small, regional access providers.
Instead, the significant mergers have been at the top, as ISPs recognize the value of big
Overall, 78 percent of dial-up customers are served by the
five largest ISPs -- with AOL and its subsidiary, CompuServe, alone reaching 60 percent of
that audience -- according to the year-end ISP census from Arlen Communications Inc.
Last month, MindSpring Enterprises purchased the
long-suffering Netcom, a pioneer that aimed wrong and saw its body count drop to barely
400,000. A few months earlier, MindSpring acquired the feeble SpryNet's
150,000-customer base, bringing its collective audience above the 1 million level.
Earthlink and Sprint effectively merged their customer
bases late last year and, for good measure, new customers jumped by 25 percent, edging the
combined venture into the 1 million-user range, amid wide praise for stellar customer
There are also powerful regional ventures such as RCN.Net,
which has 500,000 customers after consolidating East Coast ISPs such as Erol's
Upstart NetZero has signed up 200,000 customers since its
October debut, offering free dial-up access if users are willing to maneuver around a
constant, indelible banner ad on every screen. Initial response to NetZero has been far
better than to a previous California-based free-access service, @Bigger.net.
Even SBC (the former Southwestern Bell) -- the largest
telco ISP, thanks to its aggressive Pacific Bell unit -- is nearing the 500,000-user mark
after completing its acquisition of Connecticut's SNET.
Dial-up customers have proved to be a finicky breed,
hopping around to ISPs at the drop of a better offer. It will be fascinating to see how
many users the newest comer can capture. AT&T's latest long-distance nightmare,
Qwest Communications, has just unveiled its first ISP package for consumers and small
businesses. It costs $19.95 per month, but it can drop to $14.95 for Qwest's
long-distance customers -- similar to Sprint's bundled pricing.
The cable industry's view is that all of these
slow-speed users are on training wheels, prepping for the high-speed experience awaiting
them on broadband lines. As a mass-market concept, that's yet to be proven.
High-speed provocateurs may not want to pay attention to
the shadowy world of dial-up access. But it's hard to ignore the 28.2 million
customers that are there -- 19 percent more than just a year ago.
I-Way Patrol columnist Gary Arlen may not see his shadow or
much else as he recovers from the fin de siécle Super Bowl weekend in Miami.