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Boosting broadband

Fri, 04/30/2004 - 8:00pm
Thomas G. Robinson, Executive Vice President, CBG Communications Inc.

Robinson
By
Thomas G. Robinson
, Executive Vice President, CBG Communications Inc.
There comes a time when demand for many innovative products and services hits a wall. At that point, to reach the rest of the potential customer base, a new case needs to be made on price or value to create further demand.

Some signs indicate that such may be the case with cable modem-based high-speed Internet access. Demand continues to increase, but at a slower pace than in the past. To give the industry's marketing gurus their due, this potential wall is not lost on them. Likewise, to be fair to the wall-building consumer, 2004 is not exactly the boom time of the late 1990s. Consequently, price/value is a more critical concern.

Overall, TV is still the consumer's number-one concern when it comes to cable, and sometimes "the bucks stop there."

So, how does the industry create a price/value comparison that will continue to accelerate broadband? First, regarding price, tiering continues to look like a good wall-busting option. The modest success of "higher speed" dial-up connections with correspondingly modest rate increases over regular dial-up points out that a niche in the market will pay for what might be considered a limited or entry-level broadband service, at a rate somewhere between dial-up and the current lowest broadband rate.

Regarding transfer rate, such service levels would probably need to start at around 128 kilobits per second (kbps) or 256 kbps, for consumers to notice a real difference and thus judge that the difference is worth an increase over their existing monthly rate.

Then the trick is to develop enough service levels to attract increasing interest in a variety of offerings, while not creating so many that they become confusing, unable to be differentiated or act to reduce the demand for higher levels of service. Also, if the service is going to provide a guaranteed transfer rate for the different classes of service being developed, then more than a "best-effort" system must be provided. This may require investment in a higher version of DOCSIS.

If the operator can move beyond provision of best-effort services, then higher levels of service can also be guaranteed for small business, small office, home office, telecommuters and other similar consumers. This would enable the operator to have higher prices for higher guaranteed levels of service, wherein the support for these types of rates can often be seen as a business expense and potentially passed in some way to clients. If the monthly rates for such services are high enough, it not only offsets losses for creating lower tiers of service, but would tend to boost overall revenues by developing a higher quantity of demand.

Another way to increase demand is to enhance value of the service over its current perception. For example, the industry has in recent times had a stronger focus on the small- and medium-sized and home-based business market. Comcast, for example, has developed business products aimed at this market as well as telecommuters for any size business. Although current upload speeds may need to be pushed even higher for real-time, graphic- or video-intensive services, they should satisfy many of the applications in the SOHO (small office/home office) and SMB (small- and medium-sized business) marketplace.

For those who don't see the value of the basic high-speed connections, though, there are certain ways to enhance their utility and corresponding value. One would be to add value by pairing the high-speed connection with products offered by application service providers (ASPs). For example, the business products unit of a cable operator could work with "live meeting"-type application developers to add videoconferencing to the specific suite of services that the business products unit will help facilitate.

As another example, helping establish voice-over-IP (VoIP) connections to teleworkers to extend the company's internal phone system to employees' homes could provide an added benefit that would entice additional demand. Finally, one of the knocks on high-speed Internet access provided by any landline-based entity is that it still is not available to many SMB-intensive locations, such as business parks, or SOHO locations that are in lower density housing areas. In this case, more aggressive development of cable infrastructure or wireless extension of the system into such locations would nearly automatically meet those customers' demand.

The industry must begin to see cable modem service the way it has seen the successful evolution of video services–a core basic attraction for consumers, with a number of tiered or optional selections. Ultimately, the design is to meet the whole of each consumer's desires related to price/value decisions (and at the same time, obtain the maximum possible revenue from those consumers). If such a cable modem service menu were achievable, the cable industry could potentially reach high-speed Internet access penetration levels for computer owners that are similar to what they've obtained in cable penetration levels for television owners.

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