Hopeful broadband customers left in dust

Summary:A growing number of people are finding themselves back in broadband limbo as companies that once had their eyes on smaller markets scale back their plans.


The need for high-speed alternatives
Lincoln, Neb., resident Joe Eisenberg had an almost perfect experience with his high-speed DSL Internet service. That is, until his Internet service provider, EarthLink, told him they'd have to turn it off.

"I could understand if it was unreliable or full of problems, but this has worked just fine," said Eisenberg, a computer engineer. "They say they want broadband customers. But here they want to keep their dial-up customers, and they're throwing away broadband customers."

Eisenberg is one of a growing number of people finding themselves back in broadband limbo as the economic downturn forces companies that once had their eyes on smaller markets to scale back their plans.

A year ago, competition for the high-speed Net access business for city dwellers was heating up. Companies like One Main and Jato Communications said they would bring the benefits of the high-speed Net to smaller markets, especially in relatively wealthy areas like Aspen, Colo., where urban expatriates clustered. But many of those promises are on hold.

"It's a pretty hard business model to get to work," said Jupiter Research analyst Zia Daniell Wigder. "Even in the cities you're seeing NorthPoint fail. It becomes even more difficult if you look at rural areas where you don't have continuity of population."

Digital divide, all over again
The drive to ensure that rural and hard-to-reach areas aren't left in the dust of the high-speed Net has long been a fairly high priority in Washington, D.C.

During his administration, President Bill Clinton brought up the so-called digital divide in several speeches, and the Federal Communications Commission has issued annual reports on the progress of "advanced" services into outlying areas. So far, they have concluded that the market is serving these areas well.

But that may have changed with the new business climate.

EarthLink spokesman Kurt Rahn says his company has been forced to shut down some service, as in Eisenberg's case. The company has bought a host of smaller ISPs and concluded that some of their operations simply weren't sustainable.

"Unfortunately, in some cases we just had a few people signed up," Rahn said. "Obviously in these times we can't afford to have things throw (our balance sheet) out of whack like that."

Eisenberg and others in his local area have the ability to switch service to telephone company Alltel, which will still provide them with a high-speed connection. Most people in rural areas don't have that option.

"There's nothing out there," said Michael Lunsford, EarthLink's vice president of broadband services.

Playing the waiting game
For consumers waiting for the promised connections to arrive, there are glimmers of hope on the horizon.

A policy battle in Washington has focused on this issue, in part. The big local phone companies say that one reason they can't afford to provide high-speed service in rural areas is because of regulations restricting their actions. They're pushing a bill that would lift some of this regulation, but opponents of the bill say the giants are simply trying to expand their already imposing market power.

More promising, perhaps, is the arrival of satellite Net services that will be able to serve rural areas without wires or cables.

These connections, provided by companies like Hughes Electronics' DirecPC or StarBand, will be more expensive than DSL or cable modems. Some of these services have already run into a few technical troubles that have delayed their availability.

But for the near future, Internet from the sky may be rural dwellers' best and only hope, analysts said.

"There will be a price premium," Wigder said. But "unless you count satellite, there's not much out there."

Topics: Broadband, Nasa / Space

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