High-speed is big bucks - in the US at least

The $6.7bn Excite deal proves the point: Bringing high-speed Internet access to the home is big business.
Written by Margaret Kane, Contributor on

With the $6.7bn (£4.1bn) that At Home Networks is shelling out for portal company Excite Inc., the word is out -- bandwidth is big bucks.

At Home, a high-speed Internet service provider backed by cable companies, isn't the only one to discover this. The past few weeks have seen a spate of deals and announcements all banking on the fact that high-speed Internet connection is what consumers want, and will pay for. Last week, Bell Atlantic Corp. announced plans to offer high-speed access to America Online Inc. through high-speed phone technology known as asynchronous digital subscriber line or ADSL. SBC Communications Corp. announced last week that it would beef up its ADSL offerings, with plans to offer high-speed access to 9.5 million customers by the end of the year. The company also slashed prices for ADSL service in California.

Tuesday Snap!, the joint venture between US Internet firm CNet Inc. and General Electric's NBC division, announce a new version of the portal designed for high-speed users. Snap! has already signed up GTE Internetworking and SBC Internet Services, as well as Bell Atlantic.

Several of the recently announced deals involve phone companies, who hope to convert consumers who already use their lines for dialup connections. But as @Home's deal show, phone companies aren't the only ones interested in the market, which Forrester Research predicts will include two million homes by next year.

At Home's largest shareholder is cable giant Tele-Communications Inc., which will become part of AT&T Corp. TCI's competitors have had their eye on this market for a while, however. Time-Warner Inc. and Media One Group are co-owners of RoadRunner, a high-speed Internet access service in the US, with 180,000 customers. RoadRunner said Tuesday that is currently adding an average of 4,000 customers per week.

While the companies are clearly willing to put big bucks into high-speed access at this point, consumers must be willing, too. Prices can be more than double the cost of standard Internet service plans, not including installation costs. But companies seem to be confident that there will be a market for the service. "The price (of broadband access) is an issue but over time that will come down. In the long term people won't have dialup access. People will have broadband," said Jill Frankle, analyst at International Data Corp. in the US.

And deals like today's will just push the issue to the forefront of viewers minds, said Sandy Colony, vice president of corporate communications at RoadRunner. "The announcement today obviously gives the cable modem business tremendous business. A lot of this interest is based on the fact that we have proven our technology, proven customer interest. This is a very viable business," she said.

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