Page 120 - Electronic Commerce

Technology Infrastructure: The Internet and the World Wide Web

DSL is a private line with no competing traffic. Unlike DSL, cable modem connection
bandwidths vary with the number of other subscribers competing for the shared resource.
Connection bandwidth can decrease dramatically in heavily subscribed neighborhoods at 95
prime times—in neighborhoods where many people are using cable modems simultaneously.
Connection options based on cable or telephone line connections are wonderful for
urban and suburban Web users, but those living in rural areas often have limited
telephone service and no cable access at all. The telephone lines used to cover the vast
distances between rural customers are usually voice-grade lines, which cost less than
telephone lines designed to carry data, are made of lower-grade copper, and were never
intended to carry data. These lines can carry only limited bandwidth—usually less than
14 Kbps. Telephone companies have wired most urban and suburban areas with data-
grade lines (made more carefully and of higher-grade copper than voice-grade lines)
because the short length of the lines in these areas makes it less expensive to install than
in rural areas where connection distances are much longer. An increasing number of
telephone companies, cable companies, and DSL providers have replaced much of the
copper wire in their network with optical fiber cables, which have much higher bandwidth
capabilities but are more expensive and more difficult to install.

LEARNI NG FROM FAI L URES
NorthPoint Communications

In 1997, Michael Malaga was a successful telecommunications executive with an idea. He
wanted to sell broadband Internet access to small businesses in urban areas. DSL tech-
nology was just gaining acceptance, and leased telephone lines were available from tele-
phone companies. He wanted to avoid residential customers because they would soon
have inexpensive cable modem access to meet their broadband needs. He also wanted to
avoid suburban and rural businesses to keep the telephone line leasing costs low (lease
charges are higher for longer distances). He and five friends started NorthPoint Commu-
nications with $500,000 of their combined savings and raised another $11 million within
a few months. After six months, the company had raised more money from investors and
had acquired 1500 customers, but it was posting a net loss of $30 million. On the
strength of its number of customers, the company began the task of raising the $100
million that Malaga estimated it would need to create the network infrastructure.
Independent DSL providers such as NorthPoint were pressed by customers to install
service rapidly, but had to rely on local telephone companies to ensure that their lines
would support DSL. In many cases, the telephone companies had to install switches and
other equipment to make DSL work on a particular line. The telephone companies often
were in no rush to do this because they also sold DSL service, and speedy service would
be helping a competitor. The delays led to unpredictable installation holdups and many
unhappy NorthPoint customers. Customers with problems after the service was installed
were often bounced from the telephone company to NorthPoint, without obtaining satis-
factory or timely resolutions of their problems.
Continued

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