News

ISPs, CLECs Eye Wider Rollout of DSL Service

1/04/1998 7:00 PM Eastern

Pacific Bell's Silicon Valley DSL platform has become the
launchpad for an Internet service provider and other entities who are preparing to go
nationwide with use of telco lines in the delivery of high-speed data services.

Concentric Network Corp., an ISP, and Covad Communications
Co., a competitive local-exchange carrier (CLEC), have begun using digital-subscriber-line
technology to deliver multiple tiers of fast data services over Pacific Bell's lines in
several Bay area localities.

Another 'P-CLEC' devoted to packet
communications, Northpoint Communications, and other ISPs are said to be preparing
launches in the area as well in first steps toward much wider offerings.

Concentric, a provider of Internet connections to business
customers in markets representing about 90 percent of the U.S. population, is exploiting
PacBell's new FasTrak DSL platform to provide Internet access and other value-added
services to customers in the Bay area.

In contrast, Covad, with investment support from venture
capital firms and Intel Corp., has just started out as a CLEC offering services directly
to corporate customers and to ISPs using its own DSL platform in conjunction with leased
lines from PacBell.

Concentric, which began offering services commercially in
late November, will eventually use facilities supplied by P-CLECs like Covad as well as
the facilities of incumbent carriers, said Jim Southworth, director of advanced networking
services and technologies at Concentric.

'We'll probably end up working with a dozen to a
dozen-and-a-half entities, including CLECs as well as RBOCs [regional Bell operating
companies], as we expand DSL offerings across the country,' Southworth said.

Concentric's initial offering is tied only to the PacBell
service, which is available from 13 central offices in the Bay area, Southworth said.
PacBell offers a symmetrical 384 kilobit-per-second (kbps) line rate at $80 per month for
residential users and $135 for business users. Its asymmetrical service -- at 1.5 megabits
per second downstream and 384 kbps upstream -- costs $150-$250 per month.

The carrier plans to expand the DSL offerings to most of
the central offices (COs) in the Bay area as well as to a large share of COs in Los
Angeles and Orange Counties, San Diego and Sacramento over the next year, said Michael
Powell, director of DSL marketing for PacBell parent SBC Communications Inc. SBC, now
offering DSL through four COs in Austin, Texas, also plans a big push in that state this
year with rollouts planned for Houston and Dallas as well as additional COs in Austin, he
added.

SBC is about to add several ISPs to its list of partners in
these rollouts, Powell said. Later in the year, the carrier will also bring its own ISP
subsidiary into the mix, he added.

Concentric, which supplies Internet access and a multitude
of other value-added services, charges residential and business customers alike $95 a
month for unlimited usage at the lower speed and $195 at the higher speeds. Eventually,
the company will implement usage-based rates, Southworth said.

These rates are on top of what PacBell gets for DSL access.
Users also must pay $450 for the modem and an installation fee that averages about $125.

In contrast, residential subscribers to cable data services
typically pay about $40 per month with the cost of the modem included, along with about
$100 for installation. To businesses, Cable operators are charging in the range of $150
per month and up, including the modem.

Powell said pricing for FasTrak is still in flux.

'These are not mass consumer prices at this
point,' he said.

Concentric plans to expand the offering in California to
wherever PacBell expands its DSL platform, Southworth said. In addition, the company is
preparing to roll out DSL services in a number of other major markets this year, including
New York, Atlanta, Dallas and Washington, D.C.

Most of Concentric's customers receive the DSL service over
their existing lines rather than taking a second line to get the service, Southworth
noted. The carrier supplies a coupler at the premises that siphons off the DSL data signal
to a line that is directly installed to the user's modem. A typical customer might be a
telecommuter with a single modem outlet or a small business with a unit serving multiple
users.

Installation has proceeded slowly through the early phase
of the rollout, with PacBell pursuing a conservative policy of line qualification before
it hooks customers up.

'We've seen only about a third of the service area
qualifying for connectivity, rather than the 60 percent or so we anticipated,'
Southworth said.

But Southworth and Powell both said this will change now
that PacBell has had enough field experience to set more liberal parameters on line
qualification.

'We're adjusting the line qualification numbers with
the intention of getting to the 70- to 75-percent qualification level over time,'
Powell said.

One factor improving the percentage of coverage for DSL
involves second line installations, where the new lines often have fewer impediments than
existing lines. PacBell will install second lines 'when requested,' Southworth
said, but it is not pushing this approach, given its interest in using DSL to leverage
greater value out of existing plant.

The second line approach is one of the benefits Concentric
sees in its plans to eventually tap services offered by P-CLECs such as Covad. Moreover,
making use of the alternative carriers gives the ISP an opportunity to broaden the
high-speed offering to areas not equipped with DSL facilities from LECs, Southworth said.

Wide coverage is a key selling point in Covad's strategy,
said Lou Pelosi, director of marketing at the CLEC. PacBell is using ADSL gear supplied by
Alcatel and linking its central offices into Concentric's network via DS-3 (45 megabits
per second) lines.

Covad is providing ISPs an alternative to the primary telco
by setting up its own DSL platform at the central office and providing its own links
between the COs and its ISP or individual enterprise customers.

Covad, which launched services in early December, is
offering what is known as 'IDSL,' meaning ISDN-like (integrated services digital
network) DSL, that operates at 144 kbps in each direction, as well as two versions of
higher-speed symmetrical DSL at 384 kbps and 1.1 mbps and a 1.5-mbps/384-kbps asymmetrical
service, Pelosi said.

'IDSL gives us the opportunity to offer a higher-speed
service over the 30 percent or so of the lines that are too long to support the high-speed
rates,' he said.

The company's flat monthly rates are $90 and $125 for the
lower-speed symmetrical services and $195 for the higher-speed symmetrical and the
asymmetrical services. The price is the same for ISPs as it is for direct corporate
customers of the CLEC.

'With ISPs we supply the platform and install the line
as a supplier of second-tier support, leaving ownership of the customer and first-tier
support to them,' Pelosi said.

Covad is supplying modems for the IDSL service from Cisco
Systems Inc. and Pulsecom Corp. at about $250 per unit, while the higher-speed modems,
from Diamond Lane Communications, sell for $550. The firm will consider higher-speed
options as the technology evolves but is satisfied with these performance and price levels
at this point, Pelosi said, acknowledging that equipment and monthly prices now are well
above the levels that will support a mass-consumer market product.

Covad, currently passing about 400,000 households and small
business locations in the Bay area, has already negotiated or is negotiating
interconnection agreements with telcos in a number of regions around the country, with
plans to expand to a number of additional states in 1998, Pelosi said.

'ADSL is proving to be a cost-effective technology
that will allow us to move quickly to widescale service offerings,' he added.

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