Let's get ready to rumble

With all due respect to the late great baseball announcer Harry Caray, it might be, it could be, it is. It's not a home run, but events finally are shaping up a mere three years after the signing of the Telecom Act of 1996 that may finally unleash real competition for high-speed Internet access in the residential market.

After acting as if digital subscriber line service was a prized possession that needed protection from the unwashed masses of consumers, several telcos are starting to wake up to the cold reality that they must compete for customers in the residential high-speed access market, lest they be left in the dust by cable operators.

It's quite a change from DSL's incubation stage. Early in this decade, DSL was taking shape in labs as the cable killing technology that would let telcos deliver hundreds of channels via their existing copper wire.

By contrast, when cable modems were first widely introduced, most telcos treated the news with a lot of smirking and not a whole lot of fear. At the time, cable operators were in what could only be described as a serious funk. The industry had just had re-regulation imposed upon it by Washington, its reputations for service and stock prices were among the lowest and telcos were riding a wave of optimism as avenues into new business were opening up. In the back of everyone's mind were questions like, "How can a company that doesn't even know I'm getting HBO for free be trusted to provide data service?"

Three years later, the tables have turned indeed. Telcos are falling out of the good graces of various federal agencies, cable's service reputation is improving-albeit slowly-and the latter's stocks have caught what may be the last wave of a very long bull market. And lo and behold, after a few false starts, cable companies have proved they can deliver a reliable service.

It is for these and several other reasons that SBC's announcement two weeks ago that it would greatly expand DSL service in California and that it would drop rates to as low as $50 a month takes on such importance. Bell Atlantic's announcement the same week that it was teaming up with America Online could be even more significant in thenascent cable modem/DSL battle, although it likely will have less impact in the short term.

By dropping prices and expanding service, SBC joins U S West among big telcos that are beginning to treat ADSL as a product that has a natural place in the residential market and should be competing with cable modems. More important, it also was one of the first times a major telco seemed to admit that cable modems are an actual threat. Although you might not know it by their announcement, which seemed as if it was still suggesting that cable is full of smoke and mirrors. During the press conference, Dave Gallenmore, executive vice president of marketing for SBC, said the idea that cable modems are ahead of DSL deployments is "a myth."

Unfortunately for SBC and all other telcos, the numbers don't back up the claim. Earlier this month, @Home and RoadRunner, the two largest cable modem service providers, reported a combined 510,000 subscribers, and industry estimates put the total number of cable modem users at close to 1 million.

Not exactly the onslaught of consumers that cable operators hoped for, but it still gives them a big jump on the paltry DSL subscriber numbers telcos can claim. The quick deployment advantage telcos have over cable could rectify the imbalance, but only if telcos start acting as if they're in a competitive market.

A public relations consultant (he calls himself a media and marketing relations consultant) I often deal with recently tried to order service from U S West in Denver. Living in a new high-end townhouse complex where about half the people work from home, he assumed he had a good shot at being in the area where U S West was offering service. Bad assumption. Upon calling to order service, he was simply told he lived outside the service area and that he'd have to wait. No information on when service would be available, no reason as to why he couldn't get service. Just a brusque, "Sorry, try again."

U S West and SBC have taken a good first step to counteracting cable modem's offensive by pricing service competitively. Now it's time to make the big leap with a competitive attitude.