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High-speed modem within reach

A tie-up between Alcatel and Hayes should help make high-speed ADSL modems affordable for consumers, but the other factors have to fall into place.

High-speed Internet access technology ADSL has been slow to reach consumers. But a new, low-priced modem timed to hit the market shortly before telecommunication companies begin providing support for the technology may accelerate ADSL's arrival.

While ADSL has been trickling into the modem market in trials and a few small service launches, high prices and lack of support from the telecommunication companies (telcos) which provide services utilizing these modems have effectively kept the speedy devices out of consumer hands.

ADSL modems, which provide throughput speeds of about 6 mbps--many times faster than standard modems--currently are priced in the $600 dollar range.

A partnership between European telco equipment group Alcatel Alsthom (ALA) and U.S. modem maker Hayes Microcomputer, announced in June, will yield a network interface card (NIC) priced at $250, well within consumers' grasp. The tie-up has also resulted in Alcatel's supplying ADSL modem racks--which contain multiple modems--to a group of U.S. telcos made up of Ameritech, BellSouth, Pacific Bell Network, and Southwestern Bell.

"It's a really dramatic breakthrough on pricing for ADSL modems," said Kieran Taylor, analyst at TeleChoice. "$250 puts it in the [standard modem] pricing league, and it's actually cheaper than the 56-kbps modem. That aggressive of a pricing strategy will do a lot to speed the consumerization of ADSL."

The Hayes/Alcatel solution is scheduled to reach the market in the first quarter 1998. The four telcos, which in October 1996 chose Alcatel to provide ADSL equipment, are expected to start offering their ADSL services in mid-1998.

Before ADSL use becomes widespread, monthly service fees will need to follow modem prices and come down.

"I don't think ADSL will be a success unless it's priced at something comparable to what people pay for cable service now, $40 or $50 a month," said Taylor. "I think the service providers are well aware of what consumers will pay for, and the service rollouts should be priced aggressively as well."

The Hayes NIC supports Point to Point Protocol (PPP) and Asynchronous Transfer Mode, which enable connectivity to Internet Service Providers (ISPs). PPP is the protocol used by most ISPs to transfer data to end-users.

Taylor predicted widespread ADSL use by 1999.