Fast modem sales look promising

Sales of high-speed 56-kbps modems should be better than ever for vendors this holiday season because rebates and price reductions have lowered the cost of new modems to as little as $79, according to a report from Associated Research Services (ARS).

Large on-line retailers are leading the way. Computer Discount Warehouse is selling a Diamond SupraExpress 56-kbps modem for $89.30 with an accompanying rebate. Other low-priced 56-kbps modems include a U.S. Robotics Sportster Winmodem for $100 with rebate at CompUSA.

When first introduced earlier this year, modems were priced at around $185 for a version that users installed inside their PC, ARS said. The high cost, in conjunction with a lack of Internet service providers (ISPs) who could support the higher access speeds, resulted in slow sales at first.

In September, Motorola's (MOT) price reductions of 40 percent spurred other vendors to cut their prices as well, ARS noted. "Increased ISP support coupled with lower prices have stimulated sales for these products," said Jennifer Glickman, an analyst for ARS, in a prepared statement.

Consumers have also delayed sales because of concerns over interoperability. Not all 56-kbps modems work with one another, so that users could buy a 56-kbps device only to find out that their ISP does not support it. Major modem manufacturers have been offering 56-kbps modems without a industry technology standard in place, meaning that modems using x2 technology don't interoperate with modems based on Rockwell (ROK) and Lucent's (LU) K56flex modem technology.

Those fears are starting to ease, however, now that a standard for making all 56-kbps modems interoperable is on the horizon. (See related story).

Retailers have joined in on the act, too. ARS says CompUSA is offering its credit card holders a $25 rebate through the end of the holidays on many 56-kbps modems.

The ARS report concludes that holiday sales will create momentum for 56-kbps modem sales going into next year as consumers gain more confidence about their purchases.

Although vendors will be happy to finally see modem sales on the rise, their availability at commodity prices may not provide much of a boost to their financial bottom line.