By Jake Rossen
By Jesse Marx
By Michelle LeBow
By Alleen Brown
By Maggie LaMaack
By CP Staff
By Jesse Marx
On a sunny spring day in May 1998, U S West's top executives ambled from their skyscraping corporate headquarters in downtown Denver to the nearby public library, where they unveiled the company's newest product, a DSL line called MegaBit Services. Reporters, customers, a handful of cute elementary-school-age children were on hand to listen to the speeches and test out the new high-speed connections. "Today there will be no more World Wide Wait," U S West CEO Sol Trujillo said.
By the company's accounts that day, the new service would serve as a catapult to a world where people would really start using the Internet from their homes--not just for the occasional e-mail, but for complicated graphics and audiovisual downloads. Imagine, the execs gushed, the possibilities for telecommuting, for home businesses, home schooling. It was the next big thing, a way for U S West to transform itself from stodgy Baby Bell to lithe New Economy participant. And the phone company was ready to push the new service, hard.
Within days of the Denver announcement, U S West struck a deal with Dell Computer to build MegaBit-compatible modems into new desktops. A massive marketing campaign was launched, with offers of discounts and free modems and cut-rate installation. By the end of May, MegaBit had been rolled out in 20 markets, including Denver, Phoenix, Tucson, Boise, Omaha, Salt Lake City, and the Twin Cities, with 20 more cities scheduled to be hooked up by the middle of 1998.
With a single move, U S West had entered the world's highest-stakes arena: providing high-speed Web access to the masses. In 1999 some 300,000 homes in the United States had DSL service, according to statistics gathered by the Yankee Group, a technology research firm based in Boston. That number is expected to triple this year and rise to 7 million by 2004.
U S West clearly is determined to get its piece of the pie. Even now, a feature story on the company's Web site is Trujillo's explanation of how the company is leading an Internet explosion. "We've been very focused on being first to market in broadband," the story quotes Trujillo as saying. "It's been a genuine transformation."
U S West's metamorphosis has taken place against a tumultuous background. Over the past few years, companies of every stripe have lined up to tap into the market for "broadband" connections--hookups that can move vast amounts of data, fast, through the lines already running to most people's homes. Through just one wire, a consumer can theoretically get phone calls, faxes, e-mail, movies. And the battle is over which wire, which company that consumer will choose. "Whoever gets to the customer first is going to keep them for a while, no matter how painful the installation," notes Beth Gage, director of consulting at TeleChoice, a DSL consulting company based in Washington, D.C.
For a while it looked as if traditional phone companies were going to be the only ones left out of the broadband game. Cable companies began offering high-speed connections through the coaxial wires heretofore used to deliver HBO and ESPN; new firms such as Covad, Rhythms, and NorthPoint provided DSL access using existing phone wires. But the U S Wests of the world, says Yankee Group senior analyst Matthew Davis, were reluctant to get on board: They had spent a decade developing ISDN, a high-speed technology that never really took off. They had also been selling T-1 lines--yet another, even faster kind of Internet connection--to businesses for fees as high as $1,000 a month, and they didn't care to cannibalize their sales with a cheaper alternative. (In the Twin Cities, U S West's DSL hookups currently cost $29.95 a month.)
Still, says Davis, when the Baby Bells finally jumped on the DSL train, "they were sincere about it. They would like to capture as much market share as they can. U S West got out early and they really aggressively marketed it and aggressively priced it."
But could they have been too aggressive? DSL is a complicated technology, notes Thomas Friedberg, a telecommunications analyst with the Denver consulting firm Janco Partners. Because of limitations on the wires and cables that carry phone lines today, only a quarter of U.S. homes are even theoretically eligible for the service, according to the Yankee Group's data. And many more may have to wait simply because the phone companies can't hook them up fast enough. "Everyone wants high-speed access," Friedberg explains, "and there's a lot of competition for people who can deploy this. It is a problem and will continue to be a problem."
Friedberg says he gives credit to U S West for rolling out DSL as fast as it did. "But they've advertised a lot more than they've been able to deliver."
Broadband may be a new technology for U S West, but customer-service problems have been with the company for a long time. For most of the Nineties, the company did battle with Minnesota regulators over what critics call one of the worst service records in the nation; there have been investigations, fines, promises made and broken. Now, with the dispute threatening to hold up U S West's plan to merge with another digital-access giant, the company has signed on to a settlement under which it once again promises to treat customers better.