REGIONAL PROJECTS

Cable Operators Get Serious About Broadband Gaming

Comcast and RCN Launch Premium Gaming Services While Others Prepare to Follow

AUGUST 01, 2004

By Alan Breznick, Editor, Cable Datacom News

Hoping to maintain their dwindling broadband edge over the Baby Bells, several leading MSOs are boosting data speeds again and rolling out premium gaming and other specialty content services for cable modem subscribers.

In recent months, both Comcast Corp. and RCN Corp. have plunged into the gaming subscription market. The two MSOs, which compete against each other in six of North America's largest markets, have each launched on-demand gaming services that cost high-speed data users an extra $14.95 a month. The moves came shortly after the two companies boosted their top data speeds to make their broadband networks faster and thus more games-friendly.

"I feel as if this will do some serious damage," said Elad Nafshi, director of Internet and phone product management for RCN. "This is really where speed becomes relevant."

Both RCN and Comcast have also fattened their offerings of other broadband-exclusive content. In AUGUST, RCN introduced a new subscription music service, "RCN interACTION Music." The service, offering more than 700,000 music tracks, costs data subscribers an extra $7.95 a month.

At the same time, Comcast signed a sweeping content distribution deal with ABC News and the Walt Disney Internet Group. Under the landmark deal, Comcast will carry live streaming ABC news programming and on-demand video news and Disney children's games, activities and other content from the two Disney units. The MSO will provide much of the content for no extra charge, especially on the news side.

"We are looking to add best-in-class content," said Jeanne Russo, director of corporate communications for Comcast Online. "We want people to use and realize and appreciate the value of their broadband connections." Over the next couple of months, Comcast also plans to introduce video e-mail and photo slide shows, among other new applications.

Several other major MSOs may not be far behind, particularly on the gaming front. For instance, Time Warner Cable unveiled plans in late AUGUST to introduce a new higher-speed, higher-priced data tier, Road Runner Premium. In a prepared statement, Gregg DiPaolo, senior vice president of high speed data at Time Warner, said the new service, which will offer data download speeds of up to 6 Megabits per second (Mbps) and upload speeds of up to 512 kilobits per second (kbps), "should be perfectly suited to gamers and other Internet customers needing an even speedier connection."

But cable operators are not the only broadband providers with hungry eyes on the promising online gaming market. In early June, for example, Verizon Communications tripled the top upstream speed for its 2.7 million DSL subscribers to 384 kbps, at least partly to suit online gamers.

Cable operators are exploring the addition of gaming and other built-for-broadband content because they want to stave off increased competition from DSL providers without cutting cable-modem prices. With several Bells now offering DSL service for $30 or less per month, MSOs aim to bolster their high-speed services with compelling content so that they can keep their prices at $40 a month or more.

Some leading MSOs also believe that appealing broadband content will spur more dial-up Internet customers to upgrade to cable-modem service. In addition, they're counting on broadband content to help keep existing subscribers from bolting for rival high-speed providers.

"It's not just about the speed or connection, but the experience [consumers get] every time they log onto the Internet," said Greg Butz, senior vice president of marketing and business development for Comcast Online. "It's what you can do with it."

Not everyone agrees, though, that games, music, news and other nifty broadband portal features can compensate for notably higher prices. They also argue that the same kind of broadband content is often available elsewhere on the Web. For instance, Steve Forman, vice president of high speed Internet marketing for Cox Communications, told the Wall Street Journal last month that he has "not seen an ounce of research that suggests consumers are deciding on the basis of multimedia content."

As a result, Cox and several other MSOs are focusing more on providing spam filters, anti-virus protection and security firewalls to data customers. Charter Communications, for instance, announced last month that it's deploying an intrusion prevention system from TippingPoint Technologies to "eliminate malicious traffic" from its broadband network.

Comcast, Charter and other MSOs are also experimenting quietly with lower-speed, lower-priced tiers of data service to compete directly with the Bells. So far, they've been mum about the results.

Nevertheless, the broadband content movement is definitely gaining steam among cable operators. Gaming is proving especially popular because MSO executives see huge upside for the service. Among other things, they point to the popularity of Yahoo's pioneering "Games on Demand" premium package.

"Games have traditionally been one of our top content areas," said Jen MacLean, director of sports, entertainment and games for Comcast Online. She said installations have been "tremendous" for Comcast's older suite of free and premium games from RealNetworks, known as Comcast Arcade. "Our users just love to play games," she added, noting that "hundreds of thousands" of the MSO's 6 million data subscribers regularly play Arcade games.

In fact, many cable executives view premium gaming as the next great revenue opportunity on broadband. They believe that broadband gaming, more than music or news or sports or movies, could prove to be a true mass market service.

"I actually have very high hopes for this," Nafshi said. "This is where gaming kind of meets mainstream."

RCN launched its gaming service, "RCN interACTION Games," in April after raising its data download speed to 5 Mbps. The premium service, designed specifically for the overbuilder's 200,000 cable modem subscribers, now provides unlimited access to more than 70 games, including popular Atari titles. RCN then enhanced the offering last month by adding free puzzles and other casual games to the service. It also announced plans to boost its top cable modem download speed to 7 Mbps.

"It's just like another tier from RCN," Nafshi said. "It's my HBO on the Internet."

Comcast followed suit in early June by launching its similar "Games on Demand" package, featuring more than 60 games. Categories include strategy, adventure, action, family and educational, including popular titles from Atari and Scholastic. Comcast said G4techTV, its cable network focused on games and gadgets, will provide broadband content for game subscribers. The MSO also started raising its top data download speed to 4 Mbps last month.

"We'll continue to enhance the service and add new titles," MacLean said. "I think a large percentage of gamers will be interested in this service."

So far, both Comcast and RCN officials said, customer response has been strong. At RCN, for example, Nafshi said "close to 1,000" data subscribers have already signed up for the premium games service.

"In a couple of months that's not too shabby," he said. "It really sells well with families, people with kids and people who take three-product bundles. It's actually doing better than expected."