By VISHESH KUMAR
April 10, 2008; Page B5
When it comes to Internet access, is there such a thing as too fast? That's a question U.S. Internet providers are grappling with as they place strategic bets on whether or not to upgrade their networks to offer high-priced, superhigh-speed Web connections.
A growing number of households served by certain Internet providers -- notably Verizon Communications Inc. and Comcast Corp. -- are being offered Internet services that are 25 times faster than the average broadband speed in the U.S. But those who live in areas served by other Internet providers, including AT&T Inc. and Time Warner Cable Inc., will have to make do with much less for some time.
Last week, Comcast launched a superbroadband service in Minnesota offering consumers download speeds of 50 megabits a second for $150 a month, more than double the cost of its standard broadband plan. It plans to offer the new service in 20% of the area it serves by year end and to offer speeds in excess of 100 megabits a second in two years.
The cable operator hopes the new offering will allow it to catch up with Verizon, which offers top Internet speeds of 50 megabits a second through its FiOS fiber-optic network. Verizon offers that service in parts of New York for $90 a month and for $140 a month in other states.
Verizon says equipment now in the field lets it boost broadband speeds to more than 100 megabits a second. What's more, last year it started adding new equipment that will allow for speeds of as much as 400 megabits a second, says Verizon spokesman Eric Rabe. "We think having too much bandwidth is a little like being too rich or too thin," says Mr. Rabe. "For most of us, it is difficult to be too much of either."
For consumers not served by Comcast or Verizon, such speeds may be a long time off. Time Warner Cable and AT&T offer top speeds of 20 megabits and 10 megabits a second, respectively. These services typically cost from $50 to $60 a month. Both companies question whether consumers need higher speeds right now.
Time Warner Cable and AT&T argue that the money needed to upgrade their networks for higher speeds can be better utilized on other projects. How much such upgrades would cost isn't clear. Verizon is spending $23 billion over several years to build its FiOS network although that network also offers TV and phone services.
Cable operators don't have to spend as much to boost speeds. Comcast is using a technology developed by an industry group to inexpensively tie together several pipes it uses to shuttle data to customers into one big virtual pipe in order to deliver the higher speeds. This technology, known as Docsis 3.0, won't require Comcast to rebuild its network to boost speeds.
The philosophical divide will have big consequences for the camp that gets it wrong. If customers end up flocking to the superfast connections, Time Warner Cable and AT&T will be caught flat-footed without a high-end offering. And not only is broadband service the highest-margin service sold by phone and cable companies, it opens the door for providers to sell both TV and phone service. That could be an issue in markets where consumers have a choice of an ultrafast connection or a fast, but not as speedy, service. Time Warner Cable and AT&T overlap with either Verizon or Comcast in a substantial portion of their markets.
Until 1996, most U.S. households were limited to 56 kilobytes-a-second speeds on dial-up services offered by phone providers and newcomers like America Online. But once cable companies started offering faster Internet connections -- quickly followed by phone companies' digital subscriber lines -- the Internet began to change.
Watching videos over the Internet, for example, took off once a critical mass of consumers were able to use the bandwidth-intensive application thanks to the availability of high-speed connections. Now video streaming -- virtually impossible over dial-up connections -- is a major draw for consumers to the Internet.
Verizon and Comcast executives say future technological developments will ultimately vindicate their strategy. "Broadband was instrumental to the success of Google, Amazon, eBay, YouTube and all other graphics- and video-rich Web services we now take for granted," Comcast Chief Executive Brian Roberts said at the Consumer Electronics Show in Las Vegas earlier this year. "So when we boost Web speeds 10, 20, maybe up to 50 times faster than what you're used to today, it will mean a whole new world of innovation that we can barely imagine."
Time Warner Cable and AT&T argue that aside from a few niche applications like high-end videogaming, no real applications exist to allow users to take advantage of the higher speeds. "For the applications that are in the marketplace, current speeds are more than adequate for the vast majority of users," says Time Warner Cable spokesman Alex Dudley.
AT&T spokesman Michael Coe says consumers may not even be able to benefit from the very high speeds since congestion in other parts of the Internet network can ultimately slow downloads.
Both AT&T and Time Warner have other priorities. Time Warner is adding features to its TV service. AT&T says its strategy is to offer lower speeds at cheaper prices to better suit customers' budgets and notes that its 1.5 megabits-a-second service is in fact the most popular with users. It costs $20 a month.
