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Internet Access Via Cable Hits Industry Wall

WorldGate%squots Internet TV Over Cable threatens neither cable modems or WebTV, but its low price leaves cable companies unenthusiastic.

By Brian McWilliams, PCWorld   

Nearly a year ago, WorldGate Communications began testing a new service to bring 100-kbps per second high-speed Internet connections into homes using existing cable-converter boxes and TV sets. All the heavy lifting and processing would be done in a cable company%squots central offices.

WorldGate predicted last fall that its Internet TV Over Cable technology would be deployed broadly by cable operators this summer, and it has recently lined up big financial backing from companies including Citicorp and Motorola. But yesterday the company admitted it%squots just beginning to roll out the service in its first test markets in suburban Philadelphia and St. Louis.

Since the service requires no new hardware for consumers and will be priced around $5 per month, WorldGate is confident it will have big appeal to the 85 million homes not connected to the Internet today.

But analysts say that while the company may be a visionary in how to bring the Internet to the masses, it%squots having trouble getting cable operators to sign on.

Virginia Brooks of Aberdeen Research says the cable industry lags far behind datacom and telecom firms in the vision department.

%dquotThe cable guys have the least savvy, I think, about doing this sort of information exchange,%dquot says Brooks. %dquotIn part it%squots because all they%squotve had to do was download stuff to your house. It%squots a one-way street for them--or it has been up until now. All of a sudden they%squotre having to deal with when it%squots two-way.%dquot

Some observers say WorldGate%squots service poses a big threat to WebTVs and PCs using cable modems. Gary Arlen, of Arlen Communications, disagrees. He thinks cable operators don%squott like the WorldGate business model, which involves splitting the $5-per-home fee.

%dquotCable operators are trying to figure out which of the Internet strategies they should pursue,%dquot he explains. %dquotCable Labs, on the one hand, is trying to use what they call the Golden Modem, a standardized cable broadband modem. If that%squots $40 a month, that%squots the Holy Grail compared to what the cable operator will get out of the five bucks a month WorldGate is going to charge. Cable operators, when they look at business models, start to think, %squotWhere%squots the cash cow in this?%squot%dquot

But WorldGate CEO Hal Krisberg says the economics of his service are sound for both consumers and cable companies because they don%squott have to add any additional equipment like typical Internet service providers do.

%dquotThose telephone modem banks cost money, and the telephone lines cost money--all that infrastructure costs money,%dquot he points out. %dquotBut by using the cable, the cable addressable platform, and the set-top converter that are already there, the access cost and the local phone charges go away. You don%squott tie up a phone line. The only cost to the cable operator is bulk use of a T-1 line backed to an Internet board.%dquot

Krisberg says he expects a full-scale rollout of the service to begin in the first quarter of 1998.