Cable for geeks - Cable television wants to offer online service

Brandweek, May 4, 1998 by Dan Fost

Once they've surfed at cable's blazing speeds, @Home users say there's no turning back.

"I had never been on a machine that fast," says Hurley. "It was like you've been riding a bicycle and now somebody's handing you a Ferrari." Going back to a telephone modem, says Brown, would "be like being given gourmet food for six months and then going back to bread and water."

Daniel Spisak, 22, a student at the University of California, Santa Cruz, who moonlights as a systems engineer for an Internet service provider, says @Home has run into some security concerns. One issue is that users on the same local network may be able, using specialized software, to snatch passwords and other items off fellow users' Internet communications. Even worse, hackers could find their way into users' hard drives, although Spisak says there's an easy solution that customers can implement. "I know @Home is educating users about it," he says.

Lauren Meller, a spokeswoman for @Home, says the company has instituted some security measures. "Obviously, nothing is foolproof, but it would take a very powerful computer to get around the security," she says.

Still, Spisak says his main concern is that the service is not widely available.

That is a problem, says Kinetic Strategies' Harris. "Patchy availability is frustrating for the power users who want the bandwidth," he says. But access is up to the local cable provider. Some cable companies could choose to use @Home, while others make cable modems available. Modem makers, including 3Com, plan to release cable modems by the end of the year. Customers can buy their own at retail, instead of renting one, as they do through @Home. That could bring the cost down to $30 a month, Harris says-a much more attractive price for competing with telephone ISPs.

Cable companies face some challenges in marketing the service, but they also have some advantages. The people Harris calls power users understand that at $45 a month, "it's a screaming good deal. The less techno-savvy consumer has got to figure out why it's worth twice as much as their ISP. As the companies pass by the easy low-hanging fruit, it's a harder sell."

A cable system that blankets an area has the advantage of areawide marketing, such as direct mail and TV advertising. But Cox can't do that in Phoenix, for instance, because it only offers @Home to 250,000 people in a market of 1 million customers, and such ads would frustrate people who can't yet sign up.

@Home has been focusing its marketing at demonstration events, which Harris says is the best way to make a sale. "People can see streaming video, surf the sites they normally use and see how fast they come up. The normal reaction is a gaping mouth," he says.

Danny Rimer, an analyst with Hambrecht and Quist in San Francisco, says he's not concerned with whether cable companies can sell the service. "The service sells itself. It's just a matter of getting enough people whispering in order for it to spread like wildfire," he said. The main issue is how fast cable companies can get their systems upgraded to carry @Home. "There's a lot of frustration between when you see it and when you get it. That's what the cable companies have to work on."