PC makers shy from pushing broadband-ready boxes

Although recent deals between telecommunications firms and PC makers shows there is interest in the burgeoning high-speed market, analysts say sales of broadband-ready PCs have yet to take off.

3 min read
Unlike data that travels across broadband networks at lightening speeds, sales of personal computers equipped with high-speed modem technology have yet to take off.

Personal computer manufacturers, looking to sell more systems as competition increases and prices drop, announced last year that they would incorporate broadband Internet modems with their PCs. Firms like Dell Computer and Compaq Computer at the time aimed to take advantage of the growing consumer interest in high-speed Net access.

Yet more than a year later, Comdex: Closing the millennium those plans have been met with mixed results. And although a recent deal between SBC Communications and IBM shows that firms are still interested in tapping the burgeoning high-speed market, analysts say sales of broadband-ready PCs have yet to boom.

Although telecommunications firms are rapidly building high-speed networks and improving service quality, analysts say the technology is still new and continues to suffer outages and other problems. Jupiter Communications analyst Dylan Brooks said PC makers have been slow to push their Net-ready PCs for fear that they could be held responsible if the high-speed technology doesn't work well.

"They're afraid they will get dinged because it's still a buggy technology," Brooks said. "If it doesn't work it's going to reflect on the [companies]. That's the source of the hesitation--that it would sully their brand name."

Still limited in availability, digital subscriber line (DSL) and cable modems are the two leading technologies for high-speed Internet access. Approximately 2 million people use such connections today, according to various analysts' estimates.

Dell executives declined to release statistics about their broadband-ready PC sales, calling penetration rates "limited." In contrast, Gateway has yet to offer any PCs with broadband modems, executives said, adopting a "wait-and-see" attitude toward the market.

Local phone firm SBC Communications and IBM yesterday signed an alliance to bundle DSL modems with IBM's Aptiva line of personal computers. IBM customer service representatives will forward a buyer to a SBC representative to check whether the buyer can receive DSL service in their area.

"The idea is to give them one-stop shopping," John Yengo, IBM's vice president of marketing for personal systems said. "We can link them to SBC with one phone call and they can order service and installation."

Yengo said IBM won't sell modem-ready PCs to consumers unless they live in an area covered by one of IBM's telecommunications carrier partners. The deal would fall flat, he said, if consumers buy a PC but high-speed Internet access isn't available in their region.

"We're diving in where we know the consumer experience is a good one," Yengo said. "We don't want a customer to get stuck with a machine and in the end not have service."

Dell began selling cable modems through its partnership with Excite@Home last month, and previously began selling DSL modems through an alliance with local provider US West.

Although Dell executives declined to detail specific sales results, they said penetration rates have been fairly limited and will remain low until the necessary broadband networks are ready. The company expects to see substantially higher consumer interest at that time, they said.

"Within one or two years we think most computers that leave Dell will have cable or DSL modems included in them," said Stephan Godevais, a vice president at Dell. "The problem is that today [broadband is] still in its infancy. The way to get access is not easy. All implementation issues will need to be resolved. We have to make it simple."

Godevais said Dell plans to unveil a larger broadband initiative sometime early next year.

At the same time, rival PC makers such as Gateway have yet to include broadband modems with their computers.

The company said it has not jumped into the market because prior to the adoption of industry standards for cable and DSL modems, most high-speed service providers required a specific brand of modem to access regional networks.

"The cable companies preferred to use their own modems," Gateway director of consumer product marketing Michael Ritter said. "It just became easier for our users to get their own modems because the service providers said, 'Here's the piece of hardware you're going to need.'"

Ritter did not rule out the possibility of Gateway eventually offering broadband-ready PCs. "We're watching how the market is evolving. We will continue to watch," he said.