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Broadband troubles broadside consumers

The transition from Excite@Home has been rocky for customers and cable companies. Analysts say the fallout could have ripple effects throughout the technology and telecommunications sectors.

Ron Ginnetty tirelessly volunteers 10-hour shifts seven days a week as manager of an e-mail group about cancer, sending and receiving roughly 150 e-mails a day through his high-speed Internet connection at home.

But when Comcast took over the retiree's cable-modem service from dying Excite@Home two weeks ago, the e-mail stopped flowing. Because of problems related to the network switch, cancer patients and survivors wondered why e-mails to the 63-year-old Charleston, S.C., resident were bouncing back, and Ginnetty wondered why he was receiving so few responses from loyal members of his virtual club.

"I know for a fact now I'm not receiving all my mail," said Ginnetty, who has received only automated e-mail responses to his complaints and has never been able to connect to a live service agent from Comcast. "Comcast should have beefed up its customer service division, and rebates for the past several weeks of sub-par service are certainly due...I fear it'll take some time before Comcast gets the bugs worked out."

Ginnetty is losing patience with his broadband provider, and he's not alone. Despite cable companies' attempts to placate customers with rebates for outages and talk of lower prices for some people who don't use the service as heavily, the transition from Excite@Home--once the nation's largest broadband provider--has ranged from rough to extraordinarily rocky for both customers and cable companies.

A few exasperated subscribers are threatening to boycott or call in federal regulators. Some analysts say customer service has become so poor that it threatens to stymie the double-digit annual growth of broadband--a fate that could have ripple effects throughout the technology and telecommunications sectors.

"I don't want to generalize, but the big cable guys' attitude seems to be, 'People should be happy that they have broadband access at all, regardless of customer service,'" said Mark Kersey, broadband analyst for La Jolla, Calif.-based research group ARS. "People are rightfully upset. They get switched to another provider and their speeds get cut in half. They feel like they're not getting nearly as much for their money. It's a really bad situation."

AT&T, Comcast in the spotlight
Cable company troubles started in early December, when Excite@Home announced it would cease operations and the company's cable partners began preparing to be exclusive providers of broadband service for 4.1 million Excite@Home customers. The Redwood City, Calif.-based broadband provider declared bankruptcy in September and, after a thwarted attempt to sell its assets to Basking Ridge, N.J.-based AT&T, decided to transfer its customers to other cable partners.

The transfer is scheduled to be completed by Thursday, resulting in the effective shutdown of Excite@Home.

AT&T was the first to migrate subscribers, having started work on the AT&T Broadband Internet network shortly after Excite@Home filed for Chapter 11 bankruptcy protection late last year.

Even though the company had much of the infrastructure in place at the time of the transition, customers deluged AT&T's customer service centers with complaints, griping that their high-speed cable modems were barely faster than pokey, antiquated dial-up modems. Others could access only a limited number of Web sites, and many had no service whatsoever.

Some of the problems stemmed from AT&T's Herculean effort to switch more than 850,000 customers within a week--a task so large that many experts said it was impossible to do without massive disruptions.

Other complaints stemmed from the fact that, regardless of temporary glitches, one aspect of AT&T service was about half as fast as that of Excite@Home. AT&T's network allowed customers to receive up to 1.5 megabits of data per second from the Internet to their computer (the downstream speed) and to send up to 128 kilobits of data per second from their computer to the Internet (the upstream speed). By contrast, Excite@Home's customers occasionally could receive up to 4 megabits downstream and send 128 kilobits upstream--although many people had also complained about speed slowdowns in the old days.

Customers have been experiencing sporadic network and e-mail outages since the transition, AT&T says, but the network is now much stronger than in early December. In fact, spokeswoman Sarah Eder said the number of orders from new subscribers is greater than before the Excite@Home transition.

Still, the switch was an ominous foreshadowing for hundreds of thousands of the remaining Excite@Home customers--including customers Excite@Home shared with Comcast, Rogers Communications, MediaOne Group and Cox Communications.

see related story: Comcast's latest woe Lately, the loudest complaints have come from Comcast customers, including Bill Zingler. The 44-year-old software engineer in Annapolis, Md., has been noticing that it takes several minutes to establish a connection to the Internet via his Web browser. His e-mail was completely down for at least 12 hours this week, and he lost at least one e-mail from a client of his consulting company, Zingler & Associates.

He called customer service, but he hung up after more than 30 minutes on hold. He used to be proud to be one of the first people to have a high-speed home connection, but now he's warning others about the customer service plight.

"This isn't rocket science--just network management," Zingler said. "How are they ever going to sell the general public on broadband if this is the quality of product they are providing? Until the early adopters get a collective better experience, I don't think they will be encouraging the rest of the population to join in."

Comcast admits that it has labored to transfer customers. A company spokesman said that e-mail was initially out, but service has returned--though in some cases at slower speeds. Comcast has also banned the use of virtual private networks, making it tough for telecommuters who must enter a secure corporate system, and it has limited the use of newsgroups. Similarly to AT&T, Comcast capped connection speeds, making some services slower than those offered by Excite@Home.

But Dave Watson, executive vice president of Comcast Cable, noted that the company has been working under enormous time pressure and gives itself good marks.

"On the whole, given the time constraints, we think the transition went very smoothly," Watson said, noting that after the transition is complete, customers will have better service than they did when Comcast and Excite@Home worked in partnership to provide the service. "I think it's a better outcome for operators to have 100 percent of the elements under one roof. It's easier to solve problems, easier to troubleshoot, and everything moves faster eventually."

see special coverage: Complete coverage of Excite@Home troubles Tom Seward has yet to see evidence of the improvement. The Delmar, Md., resident grumbles about slower service, less than one-third of the available Web space he had with Excite@Home, and a mail server that he described in an e-mail as "verrrrrrrrry slow." The 45-year-old accountant has taken off three days of work to meet with service technicians, who took more than two months to solve the biggest problems. Last Saturday and Sunday was the first weekend since December that he had uninterrupted Internet access.

"Sometimes it takes a day or more for messages to arrive," Seward, who pays $39.95 a month for Comcast service, wrote in an e-mail earlier this week. "I'm currently waiting for an e-mail from my brother-in-law, another Comcast subscriber, who lives a mile away from me. He sent the message an hour ago."

Seward's biggest complaint is that he never learned about speed caps, newsgroup limitations and other changes from Comcast. Rather, he deduced the changes through conversations with fellow Comcast customers and from complaint Web sites.

"False promises, outright lies, and no explanation why services have been smoothed over by slick marketing verbiage tell me that Comcast does not give a fig about providing a decent service at a fair price," wrote Seward, who plans to cancel his Comcast cable-television subscription to "hit them where it hurts." "And, if another, better deal comes along, I'll drop Comcast like a hot potato."

Defectors and diminished earnings
Complaints from Seward and others have become so widespread that Wall Street is starting to worry that the customer service bugaboo could thwart broadband growth and corporate earnings.

In its fourth-quarter earnings statement, AT&T said it had issued about $15 million in credits to customers in response to transition problems. The company reported a total of $56 million in expenses related to construction of the new network and the move of Excite@Home subscribers. It also said it had added about 130,000 new high-speed data customers.

"Cable customers have been concerned with the customer service they've been receiving, and the cable companies are aware of these problems," said David Joyce, a senior equity analyst for Guzman & Co. "This issue has also been a hit on earnings for some cable companies, which had to offer free service for a few months because of the disruption."

Costs associated with the transition have already sapped Comcast's earnings. Earlier this month, it announced that fourth-quarter cash flow fell 3 percent because of one-time costs associated with the Excite@Home transition. Comcast cash flow dropped to $654.7 million from $674.9 million a year ago, and the Philadelphia-based company spent $140 million to move customers from the Excite@Home backbone to an internal backbone that Comcast had built. Excluding expenses related to the Excite@Home transition, fourth-quarter operating cash flow rose 17.7 percent.

Not all investors think broadband growth will stall, but many say projections for growth during the late 1990s--when broadband growth was driving everything from software to packet switches--was ridiculously inflated.

"The Bell companies and cable industry has delivered on its promise of a broadband future, but it has occurred at a realistic and economically affordable pace, compared with the exuberant pace consumers and investors may have had," said Fred Moran, an analyst with Jefferies & Co.

Moran noted that @Home, which acquired the Excite.com portal in January 1999 to become Excite@Home, was a major catalyst for enthusiasm surrounding the sector. When @Home debuted in 1997, it jumped 130 percent on its first day of trading.

"It was the aura around the @Home IPO that reflected a larger penetration than what the industry or experts were expecting," Moran said. "That level of penetration never materialized."

Poor customer service: Get used to it?
It's unclear whether complaining customers are already starting to look back at their Excite@Home service with rose-colored glasses. Virtually all broadband companies have been plagued by service complaints from their inception, and Excite@Home regularly fielded calls about network slowdowns or e-mail outages.

The local phone companies' high-speed digital subscriber lines (DSL) have also been notorious for network outages, and few households outside of urban centers have DSL as an option over cable anyway. In addition, DSL providers Rhythms NetConnections and NorthPoint Communications folded in 2001, and Covad Communications filed for Chapter 11 bankruptcy protection, resulting in lost connections, new contracts, service hassles and worries for those customers.

see CNET Internet: Find a broadband provider Analysts say the broadband miasma has been a result of immature technology being forced into the mainstream quickly, turning ordinary consumers into unwitting guinea pigs for technical innovation.

"They had to learn on the job, and neither one did a very good job of it," Matt Davis, a Yankee Group analyst, said of the cable and phone companies struggling to install cable modems and DSL. "Ultimately it's going to be a lot better, but it took some growing pains."

It probably won't come as comfort to angry customers, but some academics say the broadband shortfall is no worse than customer service declines in other industries during the current recession.

Daniel J. Howard, a professor and chair of the marketing department at Southern Methodist University in Dallas, said broadband providers in particular skimp on call centers and staff because of the enormous costs associated with building fiber-optic networks. But industries from fast food to insurance are also turning a blind eye to customers, he said. He's pessimistic that boycotts or federal regulation will clean up the industry--at least in the next year or two.

"Companies have realized that customer service is expensive, and most major companies have moved to a stratified level of service; they pay good service to people who pay a lot of money and the rest of us get nothing," Howard said. "My advice for the broadband customers is to downscale your expectations. Your phone call is not going to get picked up. Your e-mail is not going to have anything but an automatic reply, if that. It's not going to change until an economic upturn happens and executives believe they can afford it."