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EarthLink expands in a tough broadband market in Los Angeles

September 11, 2008 | 11:20 am

DSLWhen most people think about EarthLink, they probably think of dial-up and how painful it was in the early days to access the Internet without throwing their computer out the window in frustration. But EarthLink hasn't been just about dial-up for a while now.

The company announced Wednesday that it was expanding its cable broadband footprint in Los Angeles beyond the 400,000 homes where it's now available. The faster Internet service will now be available to 4 million additional homes in the Los Angeles area. EarthLink is billing it as an alternative to Time Warner Cable -- sort of. Although it offers customer support and features on top of it, EarthLink uses Time Warner Cable's infrastructure to deliver the service. But it's definitely a lot faster than dial-up.

"We're expanding our service because it's important to give customers choice," said Kevin Brand, EarthLink's senior vice president of product management.

Just a year ago, EarthLink, which was founded in Los Feliz 14 years ago but is now based in Atlanta, said it would lay off nearly half of its workforce and close four offices to reduce operating costs. Its stock has risen 12% in the past year as the company diversifies its offerings.

EarthLink's Internet services will be offered using Time Warner's underlying infrastructure but will be sold by EarthLink separately. Time Warner also will sell EarthLink's Internet services at its call centers. The EarthLink broadband service will cost $41.95 a month for speeds up to 6 megabits per second, compared with the $44.95 that Time Warner charges.

You might wonder why someone would buy Internet service through EarthLink if they can buy ...

... the exact same Internet through Time Warner, plus get cable and phone services bundled in. No, it's not just that they'll save $3 a month. Brand says that a lot of customers don't want the bundle and don't like getting bundles pushed on them.

Being an EarthLink customer also has a lot of benefits, he said. Dial-up customers will get to keep their e-mail addresses if they stay with the new EarthLink service. Plus, customers get free e-mail addresses, a spam blocker application and anti-virus security features. And Brand says customers like EarthLink's customer service, which is highly rated.

Still, it's going to be tough for EarthLink to make big inroads in the marketplace. After all, anyone can get free e-mail addresses through Hotmail, Yahoo or Gmail. Many computers come equipped with anti-virus features. And many of the people who want cable broadband or cable already have it.

"We've got a really mature broadband market right now," said Ben Piper, director of multiplay market dynamics at the research firm Strategy Analytics. Broadband service providers added 1 million net additional subscriptions in the second quarter of 2008, half the amount of subscriptions they added the previous quarter. Piper blamed the housing market and the economy, but also said that the broadband market was pretty saturated.

"The real challenges facing any newcomer will be trying to differentiate," he said.

On the positive side for EarthLink, Piper says customers are choosing cable broadband over DSL, which generally has slower speeds.

"We are beginning to view DSL as 'the new dial-up,' yesterday's technology," he wrote in a research note.

-- Alana Semuels

Photo credit: squarepants2004j/auntyhuia via Flickr

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