The costs and differences of these popular broadband Internet offerings are a consideration for small businesses, but none more than the need for speed.

For most small business technology applications, price is the top consideration. But when considering high-speed or broadband Internet service, that top consideration needs to be speed.

That’s because slower broadband access will likely cost more money in the long run in the form of lost productivity. So, for a small business owner, the question of whether cable is faster than DSL is a salient one. The answer?

It depends. Cable firms advertise speeds of up to 6 megabits per second (Mbps), but to quote a well-known auto ad disclaimer, actual speeds may vary. Because cable relies on shared bandwidth technology, if a lot of users are on at once in the immediate area, they will slow the connection. Average speeds for the telcos’ broadband rival to cable, digital subscriber line (DSL) service, go as high as 1.5 Mbps, but that rate tends to be steadier since bandwidth isn’t shared outside the office. Actual speeds, of course, vary from minute to minute for both.

Small business traditionally preferred DSL

More small businesses have traditionally gone for DSL. This year, 35 percent of businesses with fewer than 500 employees will have DSL versus 25 percent for cable, according to The Yankee Group, a Boston research firm. (The rest of the pie is divided by dial-up, “none” or T-1, the latter of which can be DSL or cable.) That’s changing. Over the last three or four years, many cable firms have begun targeting small businesses. “The cable companies are doing a smashup job talking about speed, speed, speed,” said Yankee Group director Steve Hilton. “It’s worked.”

In response, telcos have slashed rates for DSL. Covad, a DSL provider based in San Jose, Calif., dropped its prices 30 percent over the last 18 months. Cable companies haven’t responded to the price war, so they tend to be more expensive. Covad’s DSL starts at around $50.

Hilton says $90 a month is around the average a small business can expect to pay for either cable or DSL. Companies typically waive a set-up fee in return for a year or more contract.

Many upgrade to T-1

The question for many fast-growing businesses is whether DSL or cable broadband service is fast and/or reliable enough. Many companies opt for the more expensive and robust T-1 service, which telcos and cable firms both provide. David McMorrow, vice president of sales for Covad, says his technicians can repair a busted T-1 line in about four hours, versus 12 to 18 hours to fix a standard DSL connection. “Businesses can’t tolerate their Internet connection being down,” Hilton says.

Your business will pay for the better service, though. T-1 averages around $400 a month. But it guarantees small businesses consistent speeds of 1.5 Mbps and up.

Thermal Dynamics, an Ontario, Calif., firm that makes oil coolers and power steering coolers for General Motors’ Hummer and Ford’s Mustang, respectively, bonds three T-1s to get an average speed of 4.5 Mpbs. The firm, which has about 300 U.S. employees, pays about $1,200 a month, which includes on-call support from Los Angeles T-1 provider TierZero.

By Todd Wasserman

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What type of broadband pipe is best for your small business? Several providers have added to the selection by offering high-speed Internet over fiber optic cable.

It used to be that small businesses — especially home-based businesses — had a choice between DSL and cable modem for their broadband Internet needs. Now, several providers, including AT&T and Verizon, are offering higher speed connections over fiber optic cable.

Here we assess whether or not fiber is ideal for your small or mid-sized business or home-based practice, and discuss the pros and cons of the technology.

Advantages of fiber

“Fiber-based solutions represent the telecommunications industry’s next great hope,” says Carmi Levy, senior vice president of strategic consulting at AR Communications Inc. in Toronto. “While cable-based Internet services have gradually become much faster over the last decade, DSL has lagged, and so the market has been ready for a viable third option, and it has it in fiber.”

Levy says the move from DSL or cable to fiber can be as significant as the shift from dial-up to DSL or cable. “Next-generation speeds will also fundamentally change the face of the Internet as developers rush to bring rich new services to market that take advantage of these new, bigger, faster pipes,” adds Levy.

Steve Hilton, vice president of enterprise and small and mid-sized business research at the Boston-based Yankee Group, agrees with Levy on the advantage of greater speeds and support for richer services. “The pros of fiber-based connections are blazingly fast data, bundled voice and video, which all make for a strong … offering” for small and mid-sized businesses.

Another advantage, believes Hilton, is “extremely competitive” pricing, as is the case of Verizon’s FiOS.

Levy says fiber-based connectivity can be especially advantageous to those who work from a home office. “Home businesses in particular have long had a need for reliable, high-performance network connections, — when you’re a small business and your only connection to the outside world comes courtesy of your Internet provider, your very survival depends on how effectively it all works,” Levy says. “A slow, unreliable connection hampers your competitiveness and [can] reduce the efficiency of your business applications.” Considering many applications are going online (often referred to as “cloud computing”), the role of the network becomes ever more important.

Obstacles to upgrading

According to Hilton, the main drawback to fiber at this point in time depends on where your business is: “Geography is the biggest limitation to this technology today.”

“Geography has always been a major issue for carriers as well as consumers,” adds Levy. “While carriers have often focused their attention on deploying services to major urban areas, they have taken a much more conservative approach to servicing more rural regions.” This is largely an issue of cost, explains Levy, as it’s expensive to deliver distance-sensitive services to sparsely populated regions. In many cases, the payback period would be so long that the carriers would never make a profit, so they’ve held back.

“The question as the age of fiber dawns is whether this same urban versus rural issue will play out as well, or whether Verizon and future fiber carriers have figured out a way to bring the capital investment down so that rural users can enjoy high-speed access just like people in urban areas,” says Levy.

Wireless solutions — such as WiMAX and long term evolution (LTE) cellular technology — are also catching on, which provides a less-tethered alternative to fiber.

Hilton says other potential issues include phone system support. “I don’t think you can backhaul an IP PBX over fiber-to-the-home today,” he says. Pricing by some carriers also isn’t as aggressive, and usually involves a mandatory contract which might not appeal to some businesses.

Despite these kinks, many technology pundits believe fiber can help small businesses remain connected and competitive with this fatter pipe and access more sophisticated online resources than they could through conventional cable or DSL.

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