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Cable modems double in 1998

Worldwide shipments of cable modems skyrocket in the first half of 1998, due in part to strong sales in North America.

Worldwide shipments of cable modems skyrocketed in the first half of 1998, due in large part to strong sales in North America, according to a report released today.

Driven by increasing PC sales to North American consumers, worldwide sales of high-speed cable modems shot up 130 percent in 1998 to 492,000 units, a study from market research firm Dataquest found.

In a related release yesterday, Kinetic Strategies said that more than half a million homes in the United States will use a cable modem to connect to the Internet by the end of the year. Together the two reports demonstrate that the move toward higher-speed consumer Net access is gaining steam.

Still another trend bringing high-speed connection schemes into the limelight is PC makers' increasing tendency to emphasize connection speeds over chip speeds as a selling point for computers.

Cable modems offer home users some of the highest Internet connection speeds available, about the same as a T1 connection, though speeds can vary dramatically depending on the number of local users simultaneously accessing the cable line and the quality of service.

"The general trend is a push towards higher-speed access," said Patti Reali, a Dataquest analyst. "There is frustration with [dial-up modems]. The demand for speed is very high, especially in terms of what's happening with the Web, with graphics-intensive and video and audio-intensive sites."

Although cable modem sales make up less than 1 percent of the total market for Internet connection peripherals, Dataquest forecasts that there will be an installed base of 5.22 million units in 2001 and 7.66 million by 2002.

Top 5 cable modem vendors worldwide in first half '98
1. Motorola

2. Nortel/Bay

3. Com21

4. 3Com

5. General Instrument

Source: Dataquest

Shipments of cable modems are dwarfed by analog modem shipments, which account for 90 percent of the market. "Let's be clear, in terms of the overall market--analog still dominates," Reali said.

"It's a rocky road to retail--it won't smooth out until 2000," she continued, citing ongoing business arrangements between retailers, PC companies, and cable modem vendors. "By then, there will be more markets launched, but it will be 2001 before you get into real volume shipments."

The growing penetration of PCs into the home will be a large factor in the growth of cable modem shipments, along with the expected popularity of TV set-top boxes providing Internet access and recent decisions from PC manufacturers like Compaq to include cable modems as an option on home PCs.

Although 49 million U.S. homes have a PC, only a fraction of these have access to cable Internet providers, according to Dataquest.

Cable Internet service providers @Home and Road Runner dominate that market right now, according to the separate study from Kinetic Strategies. The two services account for 465,000 subscribers together, the study found.

More cable providers are expected to upgrade their infrastructure to offer two-way services, Reali said, especially as the cost of providing such services drops.

"There are more markets that are upgraded to two-way cable than there are cable systems launched for high-speed access," Reali said. "The market stalled somewhat this year, because [providers] don't want to launch new markets because the cost of the equipment at the cable end that enables the Internet access is very expensive."