Looming over the consumer broadband market is the shadow of powerful America Online, which plans to use its pending merger with Time Warner to push heavily into the high-speed cable modem arena, probably later this year. But if the local phone companies want to avoid a repeat of their also-ran status in the dial-up Net access world, they need to use the breathing room afforded by the market downturns to improve their own services, analysts say.

Their DSL offers still suffer from persistent complaints about long waits for installation and poor customer service once service is installed. "Customers will not be choosing cable vs. DSL," said Mike Guertin, a research analyst with broadband consulting house TeleChoice. "It will be the best installation experience that wins out." The local phone companies' temporarily strong market position is attributable at least as much to accident as to the completion of successful corporate strategies. For the past several years, the big local phone companies have trailed cable modem service providers such as Excite@Home and Road Runner that approached the consumer market earlier and have consistently maintained a tighter consumer focus. Nipping at their heels have been independent digital subscriber line (DSL) providers like Covad Communications, NorthPoint Communications and Rhythms NetConnections that offered their own high-speed services to businesses and some consumers. But each of those rivals is now strugglingfor different reasons.

The independent high-speed companies are foundering in Wall Street's hostile waters, struggling to find enough capital to fund skeleton operations. Many smaller ISPs are going out of business, finding themselves unable to pay for the DSL connections they resold for Covad or NorthPoint. That's forced layoffs and reductions of marketing and customer acquisitions expenditures for many of those companies still in business. On the cable side, corporate distractions threaten to pull the leaders' attention away from aggressive subscriber fights over the next few months. Excite@Home has been crippled by anemic share prices over the past few months, and is now heading into a custody battle between its three major cable company shareholders. Road Runner, the other major cable modem Nevertheless, complaints continue to pour in from consumers. San Jose, Calif., technology worker Mark Hull tells of being on hold for almost a full six months before giving up on the service, a story he says has turned him off Pacific Bellforever.

After ordering DSL service in July as part of the company's Compaq Computer promotion, he went through several months of restarted and lost orders before being approved. Technicians told him that his telephone line would support the service, but after getting the computer, he found it didn't work. He spent several additional months dealing with successive customer service and technical representatives before the company canceled his order again in December. "This was deplorable," said Hull, who has started an Internet mailing list dedicated to Pacific Bell's problems. "I now have zero faith in their ability to maintain the service." The Bells have also struggled to reach their own subscriber goals in recent quarters. SBC Communications fell short of its midyear DSL goals and was far from year-end 2000 goals of 1 million subscribers by the end of the third quarter. Newer services like Sprint and WorldCom's fixed wireless broadband have already begun to eat into the DSL subscriber base. Although no final datehas been set for AOL's move into the cable modem marketplace, it will radically change the broadband market dynamics when it appears, analysts say.

"I wouldn't call this the last opportunity for the Bells to stake out their mark," Guertin said. "But this is the time that the Bells really need to get all of their technical and all of their installation issues together."

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