Chicago Tribune
NEW ERA FIRES UP RACE FOR BROADBAND ACCESS
EARLY PACE MODERATE AS AT&T LEADS SBC
By Jon Van
January 16, 2000
A "new medium for a new millennium," the big idea behind America
Online Inc.'s takeover of Time Warner Inc., definitely won't arrive in
Internet time.
It'll be more like snail mail.
AOL chief Steve Case's enthusiasm for taking the Internet into a new
era of audio and video depends upon constructing the so-called
broadband networks that can deliver data at speeds 100 times faster
than today's dial-up modems.
And even though giant telecommunications corporations are spending
billions to build broadband networks, construction won't be complete
for at least a few years.
In Chicago, the race into broadband is mainly a two-way contest
between AT&T Corp. and SBC Communications Inc. AT&T owns most of the
cable television systems in the region, making this its biggest cable
TV market, while SBC owns the local phone system, operating under the
Ameritech name.
Already, AT&T has an early lead.
Its cables pass more than 2.5 million homes in the Chicago area, and
almost one-third of those homes can have high-speed on-line hook-ups
if they want, said Bob Krahman, director of AT&T@Home marketing in the
area.
By the end of this year, Krahman said, two-thirds of the homes will be
ready to connect to AT&T's high-speed on-line service, with the entire
region poised to be covered by the end of 2001.
AT&T already has thousands of high-speed Internet customers in the
region, compared with fewer than 1,500 for SBC's Ameritech, which has
been very slow to launch the digital subscriber line, or DSL,
technology that can turn regular copper phone lines into a broadband
information superhighway.
Just after it took over Ameritech in October, SBC launched a $6
billion, three-year effort to upgrade most of its phone networks to
DSL. By the end of 2003, about 80 percent of Ameritech's Illinois
residential customers should be able to buy DSL.
But the broadband networks offered by AT&T and the one Ameritech will
build have major differences.
While speeds on cable TV modems are up to 100 times faster than
dial-up connections, SBC's broadband service will be more like 10
times faster. Also, AT&T's cable connection is designed to bring full
motion video as soon as on-line services offer it, but SBC's ability
to carry video will be anemic.
William Adams, SBC's director of technology planning, said that it
will be possible to connect DSL lines to computers or to set-top boxes
that are attached to TV sets.
But even after its three-year upgrade, SBC's system won't be able to
deliver broadcast quality video, Adams said. That would require a
further upgrade as ambitious as the one just announced, he said.
"At this time, cable definitely has the advantage, both in Chicago and
nationwide," said Len Dedo, senior vice president of marketing for
Focal Communications Inc., a Chicago-based local phone carrier that
serves business customers and offers them DSL.
"Based on the way SBC has drawn specifications for its product, cable
should have an advantage with residential customers for the
foreseeable future," Dedo said.
Time Warner's ownership of the nation's second-largest cable TV system
is one reason that AOL decided to buy it. AOL wanted to be assured of
having access to cable TV platforms as well as to broadband networks
being built by phone companies like SBC.
AOL's Case envisions on-line services expanding from computers to TV
sets, providing rich video and audio, as well as the text and graphics
that dominate today's World Wide Web pages.
If AOL's merger is completed by year-end, as Case expects, the
combined firm could begin to offer enriched on-line services to people
who have broadband connections as early as next January. But those
offerings probably won't be much different from what's now available,
said Gary Kim, president of NextGen Data Research, based in Denver.
"Steve Case is dead-on with his vision of a new medium that is
video-rich yet distinct from TV," Kim said. "But it will start slow,
with small changes. Any new medium will take time to form until people
begin to understand how to use the new capabilities."
Rolling out a new Internet medium also probably will be limited by
consumer lethargy.
Most people who go on-line over phone modem hook-ups now complain
about slow speeds, and this frustration constitutes the major demand
for broadband. But that demand by itself evidently won't create a new
mass medium.
AT&T @Home's Krahman said that in parts of the Chicago region, such as
Arlington Heights, where cable-based on-line service has been
available for a year or two, only about 10 percent of the customers
have signed up.
That low response mystifies some industry experts.
It's hard to see why Internet enthusiasts wouldn't buy into broadband
as soon as possible, said Terry Barnich, a Chicago telecommunications
consultant. "The costs are reasonable and likely to drop," he said.
AT&T's cable modem service runs about $40 a month, which is about
double AOL's traditional dial-up service. But most Internet
enthusiasts find they need a second phone connection because they're
on-line so much.
Considering the cost of $20 a month for a second phone line as well as
$20 for an Internet service provider, getting AT&T's $40 high-speed
broadband service doesn't cost any extra, Barnich said.
SBC's broadband service is priced at about $50 a month. It also
includes about $200 in set-up fees, but those are waived to customers
who agree to at least one year, said SBC's Adams.
While broadband connections are much faster than standard dial-up,
they're also far more complicated to obtain. In the case of DSL,
existing phone wires inside a customer's home will be inadequate to
run the service in about one-fourth of older houses, said SBC's Adams.
New inside wiring would be required.
Technicians also may find that the connection between a customer's
house and SBC's central office is attached to equipment that blocks
DSL signals, or that the customer's Internet service provider can't
decipher those signals.
And while some computers come already prepared to be hooked into
broadband, others require installation of additional equipment.
Technicians from the broadband supplier should determine whatever
equipment is needed and install it, Adams said.
Someday, people who want DSL from the phone company may be able to buy
their own equipment and install it themselves, said Adams, but that's
not SBC's policy now.
While SBC and AT&T are the biggest broadband players in the region,
they're not alone.
Chicago-based 21st Century Telecom Group Inc. supplies cable TV,
broadband Internet and phone service to parts of Chicago's North Side
in competition with AT&T and SBC. A firm with financial backing from
Microsoft Corp. co-founder Paul Allen, RCN Corp., is buying 21st
Century.
More than a dozen companies in Chicago supply DSL to business
customers, including Focal Communications, and a few also target
residential customers. But the companies providing DSL to homes almost
all must lease copper lines from SBC/Ameritech, making them subject to
many of the same system limitations that Ameritech faces
Still, even if broadband connections in the Chicago region take a few
more years to complete, competition virtually assures they'll arrive
eventually. In the end, the race between AT&T and SBC could be only
the first round.
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