Cablecos working out glitches, Internet subscribers expected to rapidly expand

Problems that left Rogers Cable Inc customers last week complaining about breakdowns in their online services are just glitches that won’t hinder long-term growth of Internet via cable, according to a senior analyst at the Yankee Group in Canada. Jeremy Depow says cablecos shouldn’t have a problem reaching market penetration levels predicted in the second issue of Statistics Canada’s Connectedness Series. Released Jan. 17, the report says high-speed access by cable could generate $650 million-$750 million by 2007 based on cable industry forecasts. That figure is comparable to the current size of the FM radio advertising market, and to subscription revenues generated by pay and specialty television undertakings, StatsCan points out. Revenues from the provision of Internet access over cable were a modest $113.2 million ($311 per subscriber) of the industry’s total revenues of $3.3 billion in 1999. But revenues could double to about $250 million in 2001, according to the report. "The Internet is held together with bubblegum and toothpicks basically. There will be glitches in the evolutionary process that shouldn’t be blamed on the providers themselves," Depow told CCR. "The Internet has grown so fast that there are all these different technologies taped together, with pipelines going from here to there, and routers everywhere. But as it evolves, there will be backup pipes, allowing for more smooth use of the Internet." He downplays DSL providers being able to put a big crimp in cable’s plans to tap the Internet market over the long term. DSL Internet provider Bell Canada signed up 100,000 customers in its most recent fiscal quarter while Rogers and Shaw got about 40,000 new subscribers in their quarters. Bell Canada has a total of about 267,000 Internet customers, while Shaw Communications Inc has 350,000, Rogers about 315,000, and Cogeco Cable Inc has 77,000. "I think it is a myth that cable isn’t as good as a DSL service. They can be very similar and can both offer some very competitive advantages. I think the main thing will be what each provider can offer their customers in terms of marketing, creativity, bundled services and that kind of thing," Depow notes. He says problems currently being experienced with Internet access via cable will decline over the next little while, as cablecos fine tune their networks and put backup systems in place. Like Shaw and Rogers, Cogeco is considering alternatives to the Internet services they receive from @Home Corp of Redwood City, CA. According to Kevin MacDonald, director of marketing for Internet services at Shaw Cablesystems, the cableco is investing $200 million in its high-speed Internet network. Shaw anticipates its system will be capable of replacing the @Home Corp services, which primarily consist of providing the major backbone into network access points in the United States, by this April. "The expansion includes higher capacity email servers, web space servers, content servers and fibre-optic backbone," says Mac-Donald, likening Shaw’s system to a growing tree. Neighbourhoods are subdivided into smaller serving groups that are directly connected to the backbone (tree truck), while the head feeds the branches (cable routers), which connect to secondary branches and then to a person’s home (the leaves). He adds that as "more leaves grow, the bigger the trunk gets to support them. Our network can scale very quickly to accommodate growth in traffic." Rogers’ Internet service is currently more reliant than Shaw on @Home Corp, but according to spokeswoman Taanta Gupta Rogers may become more involved in the management of its network. She says Rogers would consider all options, including tapping into Shaw’s network although no discussions have yet taken place. No appropriate person was available at Rogers to discuss the company’s plans for handling increased customer growth and capacity on the network, according to Gupta. The StatsCan report concludes that the cable industry has tried to capitalize on a rapidly expanding market, but notes that cable modem service is mostly provided by cablecos with more than 100,000 subscribers. While all large cablecos offered Internet services, at least in parts of their systems — only 51 of the remaining 396, or 13% — of licensed cable operators did.

Cablecos working out glitches, Internet subscribers expected to rapidly expand

News | 02/01/2001 5:00 am EST

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