Cable Sprints, DSL Trudges, Free ISPs Pant

Aarthek writes: "A new report is showing how people are signing on to the internet. Notice that the growth according to this report shows that DSL has had less than 2% growth in the first quarter of 2001. Where Cable is showing a 18% growth. The full report can be found here." This certainly matches my experience with DSL vs. cable, but for various reasons you're probably familiar with, DSL can be a better way to connect -- if it's available in your area, and you have a solvent provider, and you're near enough to a CO, and they'll squeeze you in an installation time, and your house wiring is up to it.

Comments

The only problem with the Free ISP model was...

[jht]

The only problem with the Free ISP model was that all the companies that offered it were based on the fantasies of crack-addled minds. That's the only possible explanation. I mean, just because people are accustomed to Free Stuff On The Internet, it does not mean that the Internet itself can be free. One reason that broadcast TV works as a free access model is that there is no need to build out infrastructure to connect each subscriber (unlike the ISP business). Cable TV, OTOH, charges a premium to access each home, because they need...

Infrastructure!

Just like the free ISP's did. What a coincidence! Something like a TV or radio benefits from the Network Effect (or Metcalfe's Law) because the broadcasting to the first TV costs millions of dollars (for the studios, transmitters, etc.), but it costs $0 per set after that. The more sets, the more money the broadcaster makes.

In the ISP business, though, it costs money to support each subscriber - in technical support, fixed wiring costs, phone/modem server costs (for dial-up networks), wholesale DSL costs (for folks like WinFire), and bandwidth. These costs don't magically get cheaper with size - they continue to grow. If you lose $5 per subscriber-month, then you lose $50,000 per month with 10K subscribers, and assuming (generously) that you can reduce your expenses by $3 per subsciber-month at 100,000 subscribers, you're still losing $200,000 per month at that level. It doesn't make sense now, and it didn't make sense then, either.

My local paper (the Boston Globe) has a consumer column that runs on Sundays. A few weeks ago it spotlighted the demise of free ISP's, and featured quotes from several customers of defunct free ISP's who "felt screwed". I tell you, I never laughed so hard reading anything other than comics in a newspaper.

After I recovered my breath, I then wrote a reasoned response to the consumer advocate and explained Economics 101 (which, unfortunately, I think most self-styled consumer advocates either skipped or flunked). Essentially, you can't sell a dollar for 90 cents and make it up in volume. Not surprisingly, I did not hear back directly from him, though he did cite my letter briefly in a follow-up column a few weeks later.

- -Josh Turiel

DSL v. Cable comparo

[mjh]

This certainly matches my experience with DSL vs. cable, but for various reasons you're probably familiar with, DSL can be a better way to connect

Some reasons why DSL is better than cable:

• competition between vendors

Some reasons why Cable is better than DSL:

• faster
• better basic infrastructure. Whatever you say, twisted pair can not compare with shielded coaxial cable as far as signal quality. And in most cases, the coaxial cable is much shorter than the average twisted pair. After that the service runs on fiber.
• no distance limitations. If you're connected to the cable company and the service is deployed, then you get the service. None of this well my next door neighbor got the service, but I'm too far out to qualify.

Some false reasons whey DSL is better than cable:

• DSL provides guaranteed bandwidth. While, technically this is true, it's really misleading. DSL's guaranteed bandwidth is only to the CO or the exchange. After that, all the bandwidth is shared.
• DSL's private bandwidth provides better security. This is also misleading. Remember, you're connecting to the Internet. Your next door neighbor can still scan and attack your machine. On top of that, most cable systems provide encryption between the cable modem and the cable router at the provider.

For a more eloquant summary of the differences see: Simson Garfinkle's excellent review. It's a bit dated (Sept 1999) but it's still does a good job of cutting through much of the rhetoric.