How sticky are we?

Cable providers could face a tough time hanging onto their broadband customers

The DSL Forum’s recent creation of the DSLHome initiative — which resembles CableLabs’ CableHome at least in name — makes it pretty clear the battle for your broadband business is escalating. But the battle isn’t just for new subscribers, it’s as much to keep the ones each side already has.DSL are in most markets, we’re looking around. Can we get more bandwidth, cheap value-added services, lower prices — and ultimately the “triple play” of voice, video and Web for one monthly fee — from the other guy? Today, in six months or a year? Am I overpaying for what I have?  

At first, we were so excited when broadband came to town, we just ordered the first thing available. But now that cable and 

Both initiatives are working toward the same goal: to create specifications that will standardize the delivery of home network services, which in turn will make them easier and cheaper to deploy. Specifically, DSLHome is working on quality of service on demand and bit-rate on-demand mechanisms that will dynamically adjust the amount of bandwidth you receive based on the requirements of the applications you’re using. You can bet CableHome 2.0 will include something similar.

But while cable providers currently have more broadband customers, telcos, or DSL providers, are further along in delivering home network services. They’ve been deploying sophisticated 2Wire residential gateways for two years, when next-generation broadband cable set top boxes — that deliver TV and Web — are still three or four years off. Will cable customers wait? There’s some talk of deploying them sooner, but swapping out millions of set top boxes for new devices is a huge capital expenditure cable providers can’t afford after having spent so much money upgrading their cable systems to deliver broadband. They can’t afford to do it, but if they don’t, they risk losing a lot of customers. 

Add to that two other ways the cable guys are liable to lose customers. One is with high prices. I pay $135 per month for Time Warner Cable Road Runner service, which includes basic broadband and digital TV with HBO. In addition, I pay $40 per month for one Verizon land line, and $60 per month for two cell phones for my son and me. Where’s the fat? In the cable bill.

That brings me to the second way. Our entertainment habits are fast changing. We’re watching less TV, surfing the Web more and buying our favorite shows on DVD. A new report from Parks Associates confirms that the younger we are, the less TV we watch. I see it in my own house and in those of friends. One has already cancelled his cable service and now only watches rented DVDs. He tells me his TV viewing had dwindled to one show: “Star Trek: Enterprise”. “And that wasn’t worth $50 a month,” he says.

And since I only still watch HBO, that means I could cancel my cable service altogether, buy “The Sopranos” and “Six Feet Under” (when it comes out) on DVD, and subscribe to Verizon DSL for $29.99 per month — and save $106? That’s a lot of DVDs. Why do we need the cable guys again?