DSL Prime News: The Inside Source

DSL Prime reports that the world is going to broadband—but the U.S. and the UK will continue to lag as competition is stifled. Also, Bells should not count as "subscribers" anyone whose line doesn't work.

by Dave Burstein DSL Prime [May 7, 2003]

"The world is going to broadband"
—NTT President Norio Wada to the WSJ.

Japan added over a million DSL lines this quarter.

The DSL modem died officially with TI's announcement of a single chip home gateway/router. It comes with controller, DSL digital pump, analog front end, line driver and more, as well as software that includes everything from NAT to a SIP phone. The price: essentially the same as a bridge modem with Ethernet. Every home gets a full gateway.

Add $10 for 802.11 Wi-Fi (BOM); another $10 if you want a SLIC/SLAC and connector for a SIP phone. That means smart CLECs will copy Japan's Yahoo BB and include a phone ready to go with every modem. (EarthLink already has a deal with Vonage; imagine if AOL follows suit.) Telcos preparing to fight cable telephony with $5 second lines might also start shipping that port on the modem.

The cable fight will be lost in the U.S. and U.K. unless the DSL networks are considerably more robust. I held over that article for next issue, after I get some comments; e-mail me if you'd like to see a draft.

Verizon: speed up, price down
1.5/128 $35, bundles at $30; MSN 8 offered to customers
Ever invaluable DSL Reports broke the story: Verizon customers can call and get their price reduced. They are in a careful soft launch now, but will already raise the speed cap from 768 Kbps to 1.5 Mbps if you are within 12,000 wire feet. Bobbi Henson of Verizon says the goal is to provide the higher speed "wherever technologically feasible" and to lower prices for all. $30 to $35 is low enough to improve Verizon's dismal recent quarters, but not enough to really drive demand. The 160,000 in Q1 included an adjustment to stop counting customers whose service isn't working, a welcome move I urge on the other Bells.

John Hodulik of UBS and Griffith Jones of Scott Stringfellow were quick with the report. Hodulik calls this "A Better Way to Sell DSL". I agree, of course, having observed price has been the key sales motivator around the world. Price won't be enough, however, going forward—I think much higher speeds and innovative service need also to be part of the deal.

Verizon drops wholesale price to $27 to $29
Still tight margin as retail goes to $30 to $35
Earthlink has been promoting cable (and Covad) in order to get lower prices, while some other ISPs have dramatically reduced their DSL sales efforts. Meanwhile, the bells are moving prices down, to the point Pac Bell is selling retail for less than wholesale. Verizon's responding, Tim Horan of CIBC reports, by dropping their wholesale prices. They are still far above the German/British level of $15 to $20, and about what Bell Canada charges retail including ISP, but the drop is welcome, leaving some room for independent ISPs. (One is considering re-entering the DSL market in New York.) The cost of install, interconnect, and transport all have to be added, however, so the margins remain very low. British Telecom a few weeks ago lowered their wholesale price, but I killed the story when I discovered they also had raised the other fees, leaving independent ISPs no better off.

"This proves that competition works," Charlie Hoffman of Covad writes. "Covad initiated retail price decreases last summer, and Covad competition in wholesale induces the ILECs to lower the wholesale prices in order to keep or grow their business from ISPs." Covad's pricing has had results. "AOL order volume with us is growing nicely."

Powell: FCC Triennial won't recant on linesharing
Covad likely to appeal
Tom Leithauser of TR reports "The order should exactly reflect the Commission's decision,' he said. 'It's dangerous for the FCC to change its outlook on an issue during the period between the official vote and the release of the order. You run the risk of looking like you're not engaged in rational decision-making.' Covad Communications Co., which depends on line sharing, has argued that the Commission could issue a 'sua sponte' reconsideration of the line-sharing decision. 'If you're Covad, I would expect that 10 seconds after the clock starts, you're going to file for reconsideration,' he said."

When Covad asks for reconsideration, Adelstein and Copps will face a tough decision. They cut a deal with Martin to protect UNE-P and sacrifice line-sharing, although they clearly support it. I suspect they'll decide "a deal is a deal," while looking for a way to make a change

Copyright 2003 Dave Burstein.
The DSL Prime Newsletter is reprinted with permission.

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