BellSouth Plots Ambitious ADSL Plan

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BellSouth Corp. last week outlined an aggressive
ADSL-rollout strategy mapped directly to the telephone industry's new
consumer-oriented high-speed-data initiative.

Officials said the company would make
asymmetrical-digital-subscriber-line service available over 1.7 million lines in seven
markets this year, starting in New Orleans Aug. 24.

At $45 per month, BellSouth's charge to
Internet-service providers for the higher-speed rate will be about the same as or a little
below what other carriers charge for their lower-speed services, with the exception of
Ameritech Corp., which is following a similar pricing and rate strategy.

"We will offer our customers a simple ADSL service
that represents the best bargain in high-speed-data access," said BellSouth CEO Duane
Ackerman, in a prepared statement.

Along with the $45 monthly facilities charge, customers
will have to pay a monthly service fee to the ISP; a one-time installation fee of about
$100; and $199 for the modem.

BellSouth said it will offer a one-tier service at 1.5
megabits per second downstream and 256 kilobits per second upstream, in contrast to many
other carriers with initial consumer-level service tiers operating at 256 kbps or 384
kbps. The telco's plans mirror speeds anticipated by the forthcoming ADSL.Lite
standard.

While BellSouth's ISP, BellSouth.net, will charge only
$59.95 per month for its "FastAccess" service, the question of which company is
offering the best bargain is debatable, given the presence of cable-modem services priced
$20 per month cheaper in many BellSouth markets.

And while BellSouth's $59.95 is equal to the price for
a similar flat-rate service offered by Ameritech's ISP, the Ameritech unit is
discounting the rate by $10 and adding no equipment charges through the end of the year.

But BellSouth's plan is clearly at the top of the
telco charts when it comes to aggressive mass-market pricing, said Craig Driscoll, an
analyst with The Yankee Group.

SBC Communications Inc., Ameritech, U S West Communications
and GTE Corp. are already in the early phases of commercial rollouts, and Bell Atlantic
Corp. is expected to announce a limited ADSL-rollout plan shortly, so the BellSouth move
suggests that "critical mass is rolling" in telco high-speed data, Driscoll
added.

However, time to market is another story.

BellSouth, in its press release, endorsed a fairly downbeat
ADSL projection from The Yankee Group, which anticipates that there will only be 350,000
lines in service nationwide by the end of 1998, moving to just under 2 million by year-end
2001.

"I was a bit surprised that they were putting our
numbers forward as the Holy Grail," Driscoll said. "These aren't the sort
of mass-deployment projections that you'd expect to be cited as a goal if the
industry is as ambitious as it said it is."

"We think that equipment will be a little bit hard to
come by for the rest of this year," BellSouth spokesman John Goldman said.

Following New Orleans, BellSouth will roll out its service
in Birmingham, Ala., and Atlanta within 10 days; and in Charlotte and Raleigh, N.C., and
Jacksonville and Fort Lauderdale, Fla., soon after.

A total of 23 more markets are slated for rollout in 1999.

Completion of the ADSL.Lite standard by the Universal ADSL
Working Group -- a consortium of telco, computer and vendor interests -- should broaden
the supplier base and eliminate shortages through the course of 1999, he added.

The cable industry, which is now estimated to be at 200,000
customers for high-speed data in North America, is well-positioned to take advantage of a
relatively slow ADSL ramp-up, its own hurdles notwithstanding, Driscoll said.

"People here at The Yankee Group have cable modems,
and they swear by them," he said, noting that low churn and customer satisfaction
suggest that cable's first-to-market advantage could be a formidable challenge for
ADSL.

The UAWG appears to be on target for completing the
ADSL.Lite specifications by sometime in October, Goldman said.

Like ADSL.Lite, BellSouth's system, which is being
supplied by Alcatel Telecom, is rate-adaptive, meaning that the data rate can fall to
lower speeds in the downstream and upstream paths, depending on the length and noise
conditions of individual lines.

But BellSouth will have to send out installers to add
dedicated in-home wires to deliver ADSL to personal computers until vendors begin
delivering ADSL.Lite-compliant "splitterless" modems, which will eliminate the
need for second wires and, in most cases, for house calls.

The new generation of equipment supplied by Alcatel, which
is designed to operate at up to 7 mbps, achieves fairly high coverage within a service
area by backing off to the 1.5-mbps level, thereby providing ample frequency paths to use
in getting around noise blocks.

But, like other telcos, BellSouth won't know until it
markets the service just what percentage of lines in any given area will qualify for ADSL
connection, Goldman said.

This year, BellSouth plans to avoid the problems that are
associated with the use of ADSL in service areas that are linked to central offices
through remote terminals that are served by trunk lines known as digital loop carriers.
There are no DLCs in the areas targeted for launch in 1998, Goldman said.

But by the end of the year, the carrier expects to adopt a
DLC solution based on various vendor options that are slated to enter the market in the
second half, said Kenneth Frank, research director for BellSouth's science and
technology group.

"I'm very confident that we'll be able to
offer service from DLCs as we go into 1999," Frank said.

Because DLCs extend central-office switching into newer
subdivisions and communities where demand for high-speed data is expected to be high, the
industry has made ADSL over DLCs a top priority.

Goldman said the carrier has a long way to go in preparing
for the launches, including the filing of tariffs with state authorities. The telco cannot
offer ISPs volume discounts if it files with the Federal Communications Commission, he
added.

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