Will widespread availability of internet access over analog phone lines at twice today's speeds dent the market appeal of high-speed access over cable?
It's a question that has been raised by some strategists in the broadband domain in the wake of news that manufacturers of analog modems and chipsets are bringing 56 kilobit-per-second units to market, starting as early as this month. For example, interactive service consultant Gary Arlen, writing in a recent issue of Multichannel News, suggests that the new modems, in combination with slick new multimedia packages offered by on-line service providers, "could pose a significant inertia barrier to future. . . attempts to attract users for cable-modem services."
But before anybody on the cable-data front gets cold feet, it's worth considering both the real-world prospects for the 56 kbps devices and the implications for very high-speed services of a phenomenon that suddenly makes multimedia development much more attractive than it might otherwise have been with access speeds locked in at 28.8 kbps and below.
U.S. Robotics says it will be first to market with 56 kbps modems, offering product in several markets by January in conjunction with largescale trials scheduled by America Online and others, and rolling out to all markets by the end of the first quarter. "We expect access at these rates to be supported by ISPs (Internet service providers) on a very wide scale, very quickly," says Larry Kraft, manager of product marketing at USR.
While USR had not quoted prices for its new modems at press time, Kraft makes clear that the difference in cost between the new units and today's 28.8 and 33.6 kbps models will be "incremental." Moreover, he says, the firm's recent vintage Sportster modems, priced at $150–$200, will be upgradable to 56 kbps capability with replacement of a single ROM chip, and one model will be software upgradable.
Other manufacturers offering 56 kbps technology are Lucent Technologies, Motorola Corp. and Rockwell Semiconductor Systems. While there are incompatibilities among the various approaches taken, they are all quite similar, in that they rely on the fact that most ISPs are connected via digital T-1 links to central office digital switches, which eliminate any need for analog-to-digital signal conversions in the network in the downstream direction.
While the passing of the signal from the switch to the subscriber phone line requires a digital-to-analog conversion, it is the analog-to-digital conversion that is the source of the quantization noise that cuts into the full data delivery potential of the frequencies used in voice signaling, Kraft explains. "The analog-to-digital process remains unchanged in the reverse direction, which is why the modems are asymmetrical with a 28.8 kbps return," he adds.
Several major ISPs, including America Online, CompuServe, Prodigy, MCI, Netcom and IBM Global Network, say they will move quickly to make 56 kbps access widely available over the USR system. AOL appears to be on the fastest track, having announced it will launch trials of 56 kbps access with beta users starting this month in New York, Chicago, Washington, D.C. and San Francisco.
Like other backers of the USR approach, AOL's points-of-presence are equipped with USR's Total Control hubs, which means they can be upgraded to 56 kbps speeds by downloading the "x2" product software without changing out any hardware, notes Kathy Johnson, spokeswoman for AOL. "Offering customers access at these speeds will allow us to provide more multimedia-rich services," she says.
"We'll be upgrading almost all of our Total Control hubs to 56 kbps," says Robert Hoskins, spokesman for MCI's Internet operation, noting this is equivalent to the rate delivered by one of the two B channels in ISDN. "We've already performed testing in close cooperation with USR, so I don't expect the field trial period to last very long before we go to fullscale deployment."
But not everybody in the ISP community is ready to jump on the 56 kbps bandwagon. And even AOL makes it clear that it will not go to commercial deployment until it has a chance to look at a variety of approaches and is satisfied the industry is settling on a standard.
"We'll absolutely offer 56 kbps access, but not until the market is ready," says AOL spokesman Tom Monagan. "The various approaches have to be battle tested in the field, and the industry has to get a feel for what works and what doesn't before we can push forward."
Some other major ISPs are even more cautious, to the point of skepticism, about the feasibility of offering 56 kbps service anytime soon. This is especially true of those whose customer base is largely in the commercial sector, where quality of service dependability is most crucial.
"We're looking at 56 kbps with wonder and amazement," says Mike O'Dell, vice president of research and development at UUNet Technologies Inc., a leading ISP in the large business sector and one of the seven companies charged with operating the Internet backbone. "As far as I can tell, if that technology works, it will mean that people can finally get access at 28.8. With the real-world experience we've had of what you get out of the loop vs. what vendors say you'll get, I'm incredibly skeptical."
PSINet, another leading ISP targeting business users, isn't on the 56 kbps bandwagon, either, says CTO Charles Davin, citing lack of standards on protocols at 56 kbps and uncertainty over just what portion of the wireline market will be able to support access at that rate. Until these things get sorted out, PSINet is sticking to ISDN as the route to the next tier in access speeds, he says.
"We certainly hope higher speeds are inevitable, but we're not prepared to say this is the right approach," Davin comments. "You don't want to make the claim that anybody can get access at this rate if you're not sure that everybody or nearly everybody can."
Such skepticism is met with derision in some quarters. "It's highly ironic that ISPs, whose restrictive allocation of access ports in relation to the number of users is the primary reason why 28.8 kbps modems slow down at peak periods, should be worried about whether 56 kbps modems will perform as specified," says Charles Colby, COO at Vosaic Corp., a supplier of advanced multimedia software for Web streaming and other applications.
"If an ISP's customers' 28.8 modems are running at slower rates a good bit of the time, it means they've got too many users contending for access," Colby says. "Naturally, they'd be afraid to support 56 kbps, knowing that the difference between what the modem can do and what they can deliver will be even bigger."
USR is certain that the "vast majority" of people on standard telephone lines will have no trouble operating at 56 kbps, Kraft says. But he acknowledges that it will take widescale field testing to be able to quantify just what the percentage is.
Lucent Technologies also wants to see the technology in operation before committing to any hard and fast numbers, says Martin Rauchwerk, modem marketing manager at Lucent. "Right now, we're confident enough to say that the technology will deliver at significantly higher than 33.6 kbps over a significant number of lines," he says. "We don't expect that 56 kbps will be achievable at an extremely high percentage of the time."
One sign that 56 kbps is for real is the fact that it has strong support from the semiconductor sector. Texas Instrument Corp., which will manufacture DSPs (digital signal processors) for the USR modems, plans to produce 20 million units in '97, Kraft says. "TI will be marketing to a broad manufacturing base, which should result in strong modem support for the x2 system beyond USR's modem line," he adds.
Lucent Technologies' Microelectronics Group is also planning to manufacture DSPs for 56 kbps modems this year, based on protocols developed by Lucent, Rauchwerk says. "We very much favor a standardized over a proprietary approach, but we can't wait for a standard when a competitor is moving forward with its own proprietary system," he says.
Lucent, which does not make modems itself, has not announced any modem manufacturing support for its DSPs as yet, but is in discussions with a number of modem companies as well as ISPs to form a broad alliance backing its approach. "Until we have standards, these different systems will not be able to communicate with each other," Rauchwerk says.
Lack of standards is probably the most worrisome issue for those pushing rapid penetration of 56 kbps technology. This, more than uncertainty over line performance, is why PSINet is sticking to its use of ISDN as the route to the next tier in access speeds, Davin says. "We found out the hard way that customers do care about standards, so we think that getting to a standard at 56 kbps is essential to making this a commercial offering," he notes.
But backers of 56 kbps capability are anticipating that the market force of those offering the services will snowball the holdouts into coming on board fairly quickly. "This (56 kbps technology) is definitely a step forward," says James Isaacs, director of product marketing at Concentric Networks, an ISP serving providers of advanced Web services for the consumer market as well as the business community at large. "We don't think there's anything that will hold it back, though the standards situation will certainly be a gating factor."
While formal standardization is not expected until 1998, there is every reason to believe that manufacturers aren't prepared to risk killing the goose in their attempts to gain control over the golden eggs. One major sign in this direction is a decision by Motorola to guarantee buyers of its 56 kbps technology that it will provide free upgrades to modify its modems to conform to whatever standards are eventually adopted.
Moreover, Lucent and Rockwell have already agreed to make their systems compatible, putting two of the major chip suppliers on a non-collision course. One source, asking not to be named, says this is really the beginning of the final push to standards, because Rockwell plans to supply chips for the USR modems. "Ways are being found to ensure compatibility, even though each manufacturer might have different features within the protocol stack," the source says.
"We're proceeding on an assumption that 56 kbps will quickly become the norm in analog access," says Vosaic's Colby. AOL believes the industry will be close enough to concurrence on the fundamental compatibility issues that it will be safe to go commercial with 56 kbps access sometime in the second half of the year, Monagan says.
Assuming this prognosis is right, broadband operators will soon be facing a very different value equation in the marketplace. ISPs, of course, have no way of charging more to those who happen to access their services with 56 kbps modems, which means the ever-falling flat rate levels for unlimited Internet access will soon be getting the user double the bang for the buck.
Thus, the question facing broadband access providers comes down to customer perception of value for a service that costs more relative to standard service than was once the case, while delivering a smaller margin of performance improvement than was assumed when the broadband data cost models were being worked up in MSO business plans. Ironically, it appears that, despite the narrowing of the speed gap, the emergence of 56 kbps access will actually be a boon to customer perception of value for high-speed access.
This is because, as Colby notes, 56 kbps represents a threshold for multimedia presentation that vastly expands the potential market for graphic- and video-rich Web content. "We believe broadband access will happen on a mass scale very quickly, once the technology becomes more standardized, probably within the next two years," Colby says. "But meanwhile, we expect a majority of people to upgrade to 56 kbps access, which will create a huge market for video-rich content."
In other words, developers will be encouraged to create the material that is essential to making broadband access much more appealing to the average consumer than it would be if all they could get is what's on the Web today. "We believe video is quickly becoming a major factor in drawing people to the Internet," says John O'Farrell, president of US West Interactive Services, a unit of the carrier's cable-oriented Media Group. "Our goal is to exploit this phenomenon to the maximum extent possible as we introduce high-speed data services."
Indeed, judging by the performance of Web streaming and other software scheduled for release over the next two to three months, the multimedia foundation taking shape on the Web ahead of broadband rollout will be much broader in scope and richer in quality than many cable strategists had anticipated. For example, sources say that Vosaic will soon deliver software plug-ins that will allow anyone with a 56 kbps modem to download MPEG (Moving Picture Expert Group) compression files in real time for full-screen display on personal computers.
"They'll bring this out in the first quarter," says a source close to one of the cable networks that will be using Vosaic's technology. "Over a 56 kbps modem, you'll see full-screen MPEG video on a PC screen with pixel resolution of 320 by 240 at a frame rate that looks like 20 frames per second, even though it's 10 to 12 frames per second."
Further along in commercial penetration of Internet streaming technology is Vosaic rival VDOnet Corp., which now has US West, as well as Microsoft Corp. and Nynex as equity investors and development partners. VDOnet this month is releasing a new version of its software that supports 30-frame-per-second video streaming of wavelet-compressed files over 56 kbps modems at resolution sharp enough to support a wide-screen window display consuming close to half the PC screen. Both VDO's and Vosaic's software systems support fast forward, pause and reverse and will be available to users with Pentium caliber PCs via downloads from World Wide Web servers.
What the presence of more multimedia rich content on the Web can mean to suppliers of high-speed cable modem access is illustrated in a recent experience of Roger Keating, vice president of Comcast Online, which is overseeing operation of Comcast Corp.'s data service in Baltimore and Sarasota, Fla. One of the local Web site developers Comcast has been working with in efforts to add multimedia-rich elements is operated by the Walters Art Gallery in Baltimore, a large museum that supports 3D virtual tours through the Web.
"I had occasion to help my father install a new computer over Thanksgiving and downloaded the Walters Gallery tour just to try the system out," Keating says. "It was the first time I've worked on-line over standard phone lines for some time. The download took 15 minutes. At my office, it takes 10 seconds."
With a 56 kbps modem, the download time would still be seven-and-a-half minutes, which in relation to 10 seconds, isn't all that much better than 15 minutes. But what is better is the fact that the presence of a wide market base of 56 kbps access users will likely spur a lot more sites where the 10-second download is worth far more to the average Web surfer than it is today.