Upstream without a paddle

With SBC's announcement that it is bumping up its DSL upstream speeds (see story in Top News), all of the RBOCs have now left behind the sluggishness of 128 kb/s uploads. SBC plans speeds as high as 512 kb/s by the end of the year, while both Verizon and BellSouth are at 384 kb/s and Qwest is on track to breach the 1 Mb/s threshold with a whopping 896 kb/s.

What's more significant than the increases in outgoing pipe width is the justification for those increases. Carriers have realized that a fat download pipe is not what customers necessarily want, and while download speeds have increased significantly across broadband platforms over the years, the upstream is where all of the new consumer activity seems to be.

We have digital photography to thank for that. The sheer volume of Internet images recording the vacations and birthday parties of millions of broadband users is testimony enough to the amount of uploading going on. But it's not just photography: Personal Web storage and hosted Web site usage are on the upswing as more people become Web-savvy, also thanks to their digital cameras. Online gaming, which requires as powerful an uplink as it does a downlink, has exploded in the last year with the launch of Microsoft's 'Xbox Live' service. And we can't forget about VoIP, which--while still in its infancy--is starting to spread across the globe.

Consequently, carriers are starting to latch on to all those services. The RBOCs' uneasiness about VoIP aside, new multimedia messaging applications, online gaming promotions and photo storage and development tools are starting to pop up on carriers' and MSOs' Web portals. Qwest and SBC both offer promotions for Xbox Live, shipping discounted starter kits and subscriptions to new customers, while online photography services are promoted via tons of free developed prints.

In general, these kinds of promotions make sense. They encourage people to try what broadband has to offer, and the better that a service provider demonstrates broadband's utility, the more likely that customers will buy and keep it. The problem is these services all seem to promote broadband itself, not the carriers' particular broadband services. Once the customer receives his free gaming subscription from SBC or Qwest, he becomes an Xbox Live customer, which receives his money and presumably his loyalty. Once the free prints are used up, a customer is dealing solely with Ofoto, not with the provider that launched the service.

Oddly, service providers don't seem to be drawing many lessons from the enormous success they've had with bundling. Linking local service with long-distance and DSL created significantly higher ARPUs for the RBOCs in the last year and helped stymie line losses to competitive carriers. It makes sense that the same logic would apply to broadband services, which, just like voice, is rapidly becoming commoditized. If the carriers keep it up, they could create a massive demand for broadband without creating any loyalty for their own products.

While it doesn't make sense for the RBOCs to become major content providers, the kind of partnerships the carriers formed with companies like DirecTV and Echostar could serve them very well on the content side, allowing them to become clearinghouses for all sorts of high-demand and revenue-generating services instead of mere gateways to those services.

Contact me at kfitchard@primediabusiness.com.