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Cable modem use growing

Like the mouse that roared, high-speed Net access via cable systems finally is making itself heard in a cutthroat market.

Like the mouse that roared, high-speed Net access via cable systems finally is making itself heard in a cutthroat market.

It comes despite a bumpy start--delayed rollouts, a shakeout among modem makers, and complaints about speed and reliability--that had many analysts wondering if the new services would ever get off the ground.

@Home (ATHM)--a barometer of the nascent industry's health--said today that it had signed up 26,000 paid subscribers, more than double the 12,000 who were on or converting to the service as of June 30. The company also told analysts today that it expects to double its subscriber number again in the next three months. (See related story)

"If bumpy is doubling your subscriber base, I'll take it," said Lauren Fine, an industry analyst with Merrill Lynch. Fine remained optimistic that @Home could meet that goal, too.

Today's subscriber numbers exceeded her estimates of about 23,000. She also was impressed that the average @Home user goes online more than ten hours per week.

@Home, whose principal owners include TCI, Comcast, and Cox, is not alone. Last month, Time Warner's version of the service, dubbed Road Runner, said it had 15,000 subscribers. Named after the famous Looney Tunes character, Road Runner launched last year, like @Home. Other services include US West's MediaOne Express, which signed up its 10,000th customer last month.

All told, the subscribership for these services is more than 50,000, according to Danny Rimer, an analyst with Hambrecht & Quist. "Certainly it's showing early signs of taking off," he said. "Of course, we're still talking about numbers in the thousands and tens of thousands, not millions."

A study by Kinetic Strategies earlier this year predicted that subscribership will grow to 197,000 customers by early next year, 1.6 million in 2000, and 3.2 million in 2002. It may take three years of operation for cash flow from the service to become positive, though, the study warned.

In addition, the industry faces hurdles. The cable industry has a reputation among many users for service problems. Some users of @Home and Road Runner already have complained about service, support, and slower-than-expected speeds. (See related story)

The services typically promise speeds of up to 10 mbps, although many users complain that it is not that fast. The services usually cost from $40 to $45 per month.

Competition is fierce, too. Telecommunications carriers and Internet service providers, for example, offer ISDN, and they are in the process of rolling out higher-speed xDSL (digital subscriber line) services. Wireless high-speed Net access providers also are sprouting up, posing a further threat.