Broadband Provider Wars: The Competition Between Cable and DSL Vendors

CIO — Nobody likes a whiner. But the DSL providers acted like one anyway. And now they’re paying the price.

Over the years, a number of executives at the regional Bell operating companies (RBOCs) stated that the RBOCs were being treated unfairly under the Telecommunications Act of 1996. Those execs claimed that the only way high-speed Internet access would proliferate across the United States was if government forcibly leveled the playing field by making the cable companies open their networks to competitors in the same way the RBOCs had to. The RBOCs, it seems, initially dragged their feet in installing broadband services to their customer base because they wanted the DSL service to be unregulated and not placed in the same category as telephony. Telephony, as one might remember, was deregulated. But providers must offer competitors access to their networks at a reduced fee so that they can get into the market without having to put up poles and string wires.

But the RBOCs weren’t getting their way, so they delayed the rollout of DSL services, hoping to ultimately win the battle and offer high-speed Internet access without giving it away to their competitors.

The RBOCs weren’t completely unreasonable in playing this strategy, of course. These telcos have more than 100 years of experience in this "wait until your competitors starve" game. And they were successful in wiping out most of the smaller DSL suppliers that hoped to piggyback on the existing networks. Unfortunately for the carriers, they failed to see the cable companies sneaking up from behind.

While the RBOCs petitioned the courts and called their representatives, the cable TV companies seized the opportunity to use their infrastructure for broadband, safe in the knowledge that they wouldn’t have to share their networks with price-cutting competitors. That edge paid off: They were able to win customers by being the first in many markets to offer high-speed access. Recent statistics from Leichtman Research Group indicate that cable ISPs are still outselling DSL companies by nearly 2-to-1. And with corporate futures at stake, the infamous last mile becomes more heated every day.

Unfortunately, much of the competitive warmth on the RBOC side is nothing but waste heat. Instead of crying over unfavorable competitive and regulatory situations, these large carriers should be racing forward with new infrastructure to support higher speed access methods. They should be putting their network advantages to use for business customers looking for lower-cost connectivity. They should be upgrading their data networking expertise. Until they do, they’ll continue to lose ground?despite innovations and improvements in the chipsets and protocols that provide DSL services. Voice-enabled DSL, voice-over-IP over DSL and a host of other beneficial services for business and residential users are just waiting for implementation.

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