3Com claims 1,000 ISPs use x2

The war of words about whose modem technology rules rages on.

3Com (COMS) said today that over 1,000 Internet service providers (ISPs) worldwide are offering x2 56-kbps modem connections, while competitor Rockwell Semiconductor (ROK) insists that x2 isn't doing as well as 3Com claims.

Consumers with a 56-kbps modem must dial in to an ISP that has compatible technology, otherwise there is no advantage to having the fast modem--hence 3Com and Rockwell want to claim to have the most ISPs so that more consumers buy modems with their technology.

Modems using x2 technology from 3Com, which earlier this year purchased modem maker U.S. Robotics, currently don't interoperate with modems based on Rockwell and Lucent's (LU) K56flex technology, since standards have not yet been set.

It is presently difficult to judge whether 3Com's U.S. Robotics or Rockwell is in the lead. The consensus seems to be that 3Com is ahead for now, but Rockwell may catch up quickly.

According to 3Com, there are over 800 ISPs that have gone live with x2 modem service in the U.S. and 160 ISPs in Europe and Asia.

"We've seen strong acceptance of x2 and this milestone of 1,000 ISPs at the anniversary of x2's introduction is testament to the head-end architecture we've put in," says Neil Clemmons, vice president of marketing for 3Com. In addition, 3Com is touting market research that shows it has more shelf space in retail stores than competitors, more evidence that it is winning the battle over 56-kbps modem technology.

But Rockwell says that it expects to overtake 3Com in deploying 56-kbps technology in the "next few weeks" and that sales of modem chipsets are "booked solid."

One distinct advantage that Rockwell has is that currently more ISPs use older Rockwell-based technology and that over time, when these ISPs upgrade to 56-kbps systems, they may well upgrade to Rockwell technology.

3Com's Clemmons points to recent disappointing quarterly financial results of K56flex modem makers, some of whom use chips made by Rockwell, as a result of 3Com's strength in the marketplace. A number of K56flex modem companies have posted losses in recent quarters, and Motorola (MOT) is looking to sell its consumer modem business because of the harsh business climate.

But Rockwell rejects 3Com's interpretation of financial results, and points to 3Com's own quarterly financial results as evidence that x2 isn't doing as well as 3Com says it is.

While modem makers and modem chip companies vie to set a market standard for the latest modem technology, a preliminary international standard is still no closer than January 1998. In the meanwhile, consumers may decide to hold off on upgrading modems during one of the peak seasons for modem sales, further hurting all modem companies in the pocketbook.