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Cable will rule broadband, report says

Cable will triumph over satellite and DSL Internet access for the next five years, according to The Yankee Group. Regulatory hurdles will stand in the latter's way.

Cable modems will rule the broadband age--at least for the next five years, according to a research report The Yankee Group released Tuesday.

Companies offering cable and DSL (digital subscriber line) service have been competing to convert dial-up users to high-speed services for some time. Satellite companies have also jockeyed for customers, but cable is clearly in the lead, said Imran Khan, author of the report.

DSL technology will remain in second place due to regulatory hurdles, and other broadband technologies, such as satellite, will lag far behind, according to the report from the from the Boston-based research firm. The report, which summarized statistics on the U.S. residential broadband industry, contained several other predictions on the future of high-speed Internet access.

DSL services have been plagued since their inception by problems such as slow hookup times and billing disputes. Consumer complaints have been so overwhelming that the state of California and other regulatory bodies have become involved.

But regulatory problems are an even bigger reason for DSL's lag, Khan said. Adoption of DSL has been slowed as regional Bell operating companies (RBOCs) and other Incumbent Local Exchange Carriers have run into regulatory obstacles, Khan said. Phone companies became tightly regulated under the Telecommunications Act of 1996 and must provide access by leasing their local phone lines to rivals like Covad Communications.

Cable operators have used the opportunity to step in and take the lead, in a move that will give them a solid advantage for years to come, according to the report.

By the end of 2001, 60 percent of U.S. homes were equipped for cable modem service, while only 45 percent of homes were equipped for DSL service.

"Unless the RBOCs are given regulatory relief from making their networks accessible to their rivals, they will continue to stall," Khan wrote.

Other predictions in the report included the following:

• Overall, broadband growth will cannibalize the market for dial-up Internet access. A separate report from The Yankee Group shows that 70 percent of households that got a second telephone line in 2001 did so for Internet use, and 50 percent of those people now say they plan to drop the extra line in favor of high-speed access.

• America Online, MSN, EarthLink, AT&T WorldNet and other Internet service providers will become more active in broadband, creating more competition between cable and DSL. ISPs signing up for cable and DSL will determine which way the balance tips. AOL, MSN and EarthLink have signed agreements with RBOCs to lease DSL lines, and Comcast and United Online (formerly NetZero) have agreed to offer cable services.

• Cable modem providers may also gain an advantage over DSL providers as they launch "tiered" services. Several have already inched into this territory, and the implementation of a new technology, Data Over Cable Service Interface Specification 1.1 (DOCSIS 1.1), will speed up the process and enable "bandwidth on demand" service.

• Cable providers will also run into regulatory hurdles as the Federal Communications Commission (FCC) attempts to give DSL and cable equal regulatory footing. On March 14, the FCC declared that cable modem service falls under the same jurisdiction as DSL and proposed to examine whether it is necessary to require multiple ISP access for cable operators. The Yankee Group believes, however, that open access won't be mandated for the next two to three years.