Users still find 56K's fast enough for them

Modems: Though fast Internet connections are the future, for many consumers the value and ease of dial-up trumps speed.

April 10, 2003|By Jonathan Lansner | Jonathan Lansner,KNIGHT RIDDER/TRIBUNE

The slow lane on the Information Superhighway is a darn crowded space.

Forget the hoopla surrounding high-speed Internet access. Ignore financial headaches at the likes of America Online and Earthlink, two major providers of older and slower telephone-line links to the Web.

Relatively ancient communications science, known in the tech trade as "56K," is still surprisingly robust business.

Six years have passed since modern electronics ran up against the laws of physics when it came to basic copper telephone lines. Back then, seemingly in another era, the analog modem - what ties 80 percent of users to the Web through a dial-up connection - reached its speed limit: 56,000 tiny pieces of data per second, or "56K."

Current edge

"For a large portion of the population, all they do is e-mail, and 56K still works fine for that," says Brian Packham, owner of Orange County Online, which sells Internet hookups from Anaheim, Calif. "It's sort of funny, but 56K is not going away soon."

Zippy, broadband connections may be styled for this millennium, but simple and more affordable 56K links are tailored to this current era. Confusion about installation, service and security with faster technologies - plus a recession - give the elder science a peculiar edge.

New broadband links to the Web are at least 10 times faster than 56K. Still, global shipments of old-style modem chips - 75 million in 2002 - are nearly four times greater than the high-speed silicon that ties broadband users to the Internet. Even by 2005, industry estimates show 56K modem chips shipping 2.5 times their volume.

It's largely because most humans can do what they want to do online at the typical dial-up speed. Plus, those who haven't yet hooked up aren't likely to jump online straight to high-speed links.

The simplicity of 56K modems - only requiring regular telephone service to operate - will help place it in the bulk of new setups around the globe.

"There's still a ton of people who are out of range of broadband," Packham says.

Dwight Decker - CEO at Newport Beach's Conexant, long the dominant maker of modem chips that operate at 56K - admits he was wrong.

In the mid-1990s, he thought this niche would be winding down by 2000 as faster technologies caught on. In 2003, though, he brags that 56K is a good, growing business - one that produces average profit margins for his industry. "It looks like 56K's got another decade in front of it," he says.

`A good value'

In hindsight, of course, the techno-cheerleaders back in the Internet bubble's foamiest moments were dead wrong. The slow lane of the Internet remains financially viable.

Take United Online from Westlake Village, Calif., the top seller of discount 56k hookups under the NetZero and Juno brands. It's a growing, profitable business with a stock that's tripled in a year.

"If you went back five years, and went back to all those broadband projections, nobody would have seen it this way," says Larry Hancock of Zoom, the No. 2 consumer seller of 56K modems.

Zoom's sales of 56K products have stayed roughly flat - at 1 million annually - for five years, he says, because 56K links "remain a good value. And this is not a good time for big, discretionary spending."

Affordability is a huge issue for much of the globe - no less, for your average recession-weary U.S. consumer.

Cheap 56K chips - they go for maybe $10 in bulk - and cheap dial-up Internet connections make a great deal of business sense. While a high-speed link can cost $40 a month or more, dial-up hookups run $15 at Parkham's OCO or can be found as cheap as $10. AOL and Earthlink, who charge $20 or more for 56K links, suffer because of pricing pressures from the likes of NetZero and Juno.

"I'm cheapo," says dial-up devotee Don Hull, 65, of Costa Mesa, Calif., whose computer is as comparatively ancient as the '55 Packard he keeps as an car collector.

Affordability and confusion keep Irvine entrepreneur Aimee Spirlin, 32, in the slow lane for now. "I work from a home office and I haven't evaluated whether or not I want DSL, cable, broadband, Direct TV, etc.," says Spirlin, owner of Document Scanning Solutions. "I really only use the Internet to do minimal research and mostly e-mail. So I am basically too cheap to change right now. I do anticipate changing within this year though."

One reason 56K modems themselves are so reasonable is that in many new computers there's not much in the way of communications chips involved any longer.

The computer's brains, the processor, often does much of the modem's hook-up work with software programming. The only hardware in these so-called "soft modems" is gear that dials and makes the phone connection.

Another force boosting dial-up technology is the false promise of the paperless office. Even as e-mail becomes a ubiquitous business tool, faxes continue to be popular for business communications. Those machines are powered by chips with the same old-style modem science.

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