On Miramar Road, in a central San Diego location, Denis Alexander is selling cars over the Internet. “In an average month, we sell 25 to 30 cars a month as a direct result of the Internet,” says Alexander, Internet and fleet sales manager at Miramar Volkswagen Audi.

Volkswagen’s research shows it has the youngest clientele among major nameplates, so it stands to reason that Alexander wants to sell them zippy next gen Beetles chased down by the equally zippy mice of VW’s virtual tire kickers. “The customer is different,” Alexander says. “The ones I deal with are extraordinarily well-informed individuals. They know exactly what they want, exactly what they want to pay for it, and are not interested in any other conversations for the most part.”

What’s whetting their appetites is the VW-Audi dealer’s presence on the Internet, powered by the Bay Area’s Covad Communications. Since cable doesn’t provide high-speed access to the Volkswagen agency, Alexander and his cohorts signed up to receive their Internet service through Covad’s DSL (digital subscriber line) service.

“It’s a far less expensive way of getting new leads” compared to more traditional marketing media, Alexander says. “Using the Web is a cost effective way of generating business on a per-car basis.”

Despite the high-tech shakeout, small- and medium-sized businesses are just now getting turned on to the Internet. And it looks like the fat, data-hauling pipelines finally may be ready to live up to their promising reputations.

Survivors like Covad have withstood the downturn, and provide an alternative to high-speed access via the cable company, or the only path to high-speed when cable isn’t available. Swimming against the tide that has engulfed its competitors, Covad (OTCBB: COVD) turned in a first quarter, 42 percent revenue hike over last year.

Although it is tempting to believe that everyone’s business must be on the Net by now, this is one gold rush in which most of the ore still remains buried in the ground.

“It’s still in what I would call early stages of development,” says Vicki Marion, newly appointed president and chief executive of Viadux, formerly known as RC Networks. Marion says the high-speed chase the first time around focused on signing up residential and big businesses, where adoption can be 50 percent or more, but in most markets the penetration rate for small business is as low as 10 percent. “Providers are starting to look at how they take the next step; how do we get to this (small business) market that spends $62 billion a year on voice and data services?”

Viadux provides equipment and service to help office buildings hook up to DSL for in the neighborhood of $5,000 for a 10-office connection. Viadux expects revenue of a little over a million dollars this year, Marion says. Around 90 percent of the small- and medium-sized businesses are located in multi-tenant buildings. If an office building can get five customers to sign up for $200 a month, Marion says the investment can be recouped in as little as four months.

Residential use of broadband pipes also is fueling business use. “Once you’ve tasted broadband in the home, you don’t want to go into an office and not have it available,” she says. It is, after all, up to 50 times faster than dial-up.

Marion says DSL “as a technology got a very bad rap, because professionals in telecom acknowledge it’s a very efficient form of delivering broadband. DSL got attached to a series of service problems. It was not so much a technology choice as a customer service issue,” she says.

RC Networks’ investors, such as the Edgewater Fund, hope she’s right. They recruited her from the top spot at San Diego-based Jabra Corp., a company she helped build into the market leader in hands-free accessories for wireless phones. In four years, Marion piloted Jabra to revenue of more than $40 million annually, and to the No. 100 spot on the Forbes/Deloitte & Touche national listing of the top 500 fastest-growing companies.

These DSL boats share Broadband Bay with the same cable companies that bring you professional wrestling. Roughly north of Interstate 8, south of state Route 76, and out along Interstate 15, Time Warner’s RoadRunner Service has about 60,000 residential customers.

Local business penetration lags at about 1,000, but Time Warner serves about 50,000 commercial customers nationwide, says Fran Mingura, manager of RoadRunner’s local business services.

Commercial accounts are typically more lucrative than residential, with a $150-and-up package the norm, Mingura says. Trends driving business use in the future include an increase in telecommuters since Sept. 11, who seek a VPN (virtual private network) that provides secure communications, and the lure of one-step billing for national clients with employees in many cities. Mingura expects RoadRunner to benefit from the telecom shakeout and DSL providers that left their customers on a sandbar.

The other major cable presence serving San Diego belongs to Cox, which has about 150,000 residential customers, says Bill Geppert, vice president and general manager of Cox Communications in San Diego. Roughly 950,000 households are in the San Diego region.

Geppert is tight-lipped on the number of business customers signed up for Cox’s cable-powered Cox@Work, but says the broadband shakeout has “boosted our business.” Geppert estimates that Cox, Time Warner and Adelphia are providing Internet connections to about 250,000 residential customers, about 25 percent of households.

Lindsey Burroughs is the vice president and general manager of Cox Business Services. “There’s a secret here; we don’t need a ‘killer app(lication),’” she says. “As businesses come on and use high speed, they use more and more services.” The industry has hardly tapped the market, she says.

Niche In Business Services

Service-intensive IT providers to small businesses also are flourishing as broadband’s foothold expands. TeraCenter is an off-site IT manager that hosts Web sites, and backs up and stores data, says Jack Jecker, vice president of sales.

Among businesses that might use TeraCenter are a doctor who needs secure transport of patient records: recent cases indicate the possibility of liability for doctors who “publish” such info in e-mails traveling along the Internet, a “public place.” Or by those who want to avoid viruses and hackers or survive an ordeal known as a “disaster recovery.”

Jecker points to a labor contracting agency client that somehow lost its work schedule; TeraCenter was able to fish it out of their system. A business can tap into a full line of TeraCenter’s services for about $950 a month, Jecker says, a saving for companies that can’t afford a dedicated IT manager.

Another locally based business specialist is Next Level Internet, which provides high-speed T1 service to office buildings. Next Level can be thought of as an ISP (Internet service provider) with a niche market of about 150 clients, reports general manager Jerry Morris.

Next Level provides the technology platform for Life Flight, a service that transports those injured in remote locations to hospitals via helicopter. “What makes us different is proactive notification if a line goes down, router replacement, and an on-site techie within four hours,” says Morris.

While cable can revel in telecom’s woes, Morris says the shakeout is shaking confidence among businesses because “everybody’s concerned whether their ISP or telecom supplier will be in business.”

But Next Level benefits from DSL’s misfortune too. “DSL gave people a taste of the high-speed Internet, though they were dissatisfied with the service.” They’ll be hopping up to T1, Morris maintains, and the price for the more robust T1 is coming down to about $700 per month, versus $200 for DSL.

T1 is recommended for companies with more than 25 users that have a lot riding on communications, Morris says.

In the future, the question is not how are we going to get more bandwidth, but what are we going to do with it. “They have the capacity; what’s missing is what we call the killer app. That’s the big question,” Morris says. “Will you hop into your home office and have a totally interactive experience by creating a physical being on the Internet that shakes hands through pulse sensors?”

Only if it has a firm grip.