Cable High-Speeders View DSL Differently

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The recent meltdown in the data local- exchange carrier (DLECs) sector has cable-modem Internet service pro-viders singing different tunes about their future plans for companion digital subscriber line services in the commercial market.

While Excite@Home Corp.'s DSL plans appear to be up in the air, High Speed Access Corp. expects to get even more aggressive on that front, as it finds hundreds and even thousands of dormant DSLAMs (digital-subscriber-line access multiplexers) on the market for cents on the dollar. Road Runner, meanwhile, has remained steadfast in its decision not to pursue DSL at this time, company officials said.

Excite@Home chairman and CEO George Bell ruffled a few DSL feathers last month when he said the company would not pursue DSL in 2001 "because the economics don't add up." Instead, 2001 will be "a year of focus" for Excite@Home as the company hones in on its core data-over-cable business.

Bell made that statement despite Excite@Home's DSL-reseller pact with the financially strapped DLEC Rhythms Netconnections Inc., forged in April 2000. So far, no trials or commercial launches have emerged from that partnership, the companies disclosed.

An Excite@Home spokesman softened Bell's position on DSL, confirming that the data-over-cable provider is "exploring all of our DSL options."

A Rhythms spokesman acknowledged that, at least operationally, "there is little in terms of deployment" happening with Excite@Home. Most of the current work involves "productizing and marketing planning," the spokesman noted.

"We haven't disclosed the markets we plan to work on with @Home, but we are in several discussions with @Home," the Rhythms spokesman said, declining to be more specific.

Though Excite@Home has made it clear that DSL won't play a large role in its 2001 plans, HSA-perhaps recognizing that DLECs are in a world of financial hurt-isn't treating xDSL like a four-letter word.

Through its own reseller agreement with troubled NorthPoint Communications Inc., HSA presently has about 300 DSL lines installed. It offers the service to businesses in Denver; Tampa, Fla.; Atlanta; Raleigh/Durham, N.C.; and San Antonio.

NorthPoint's current financial condition-it has filed for bankruptcy and assigns most of the blame to its scotched merger with Verizon Communications-has also led HSA to rethink its DSL strategy.

"We have dramatically cut back and are not marketing our reseller product through Northpoint today," though HSA continues to support its existing DSL customers, HSA CEO Dan O'Brien confirmed.

Instead, HSA wants to dodge the DSL-reseller model completely and market those services directly to small and midsized businesses.

That's because the DLECs who've built out their DSL infrastructure haven't been able to create a viable business. "That infrastructure suddenly becomes available at a pretty price," O'Brien said.

O'Brien said that more than half of the DSLAMs installed inside U.S. central offices are not passing any DSL traffic. That's because a spate of ISPs or their DLEC counterparts-including Jato Communications Corp., HarvardNET, Firstworld Communications, GE Capital and Vectris DSL-have folded or are liquidating their equipment.

"In our estimation, there are about 2,000 [central offices] currently on the market in the U.S.," O'Brien said. "We believe there is a DSL retail model that makes sense, particularly if you can do it on a basis where you're buying assets for 30 cents on the dollar, fully installed."

O'Brien said HSA plans to be part of the bidding processes for some of those assets, attempting to wrest control of DSLAMs in key markets within the next 30 to 60 days. However, HSA does not expect to put up cash for those assets. Instead, it hopes to forge stock-for-gear arrangements.

HSA's cash, O'Brien said, will be leveraged to build the company's DSL commercial business portfolio, which also will include Web hosting and virtual private network services.

A focus on footprints has been a key contributor to the DLEC sector's problems.

"Wall Street wanted footprint, footprint, footprint-and that's what (DLECs) did, and they tapped other ISPs to resell the service," O'Brien said.

The economics of that model haven't been very successful. Northpoint is bankrupt and Rhythms and Covad have substantial debt levels at a time when it's questionable whether they will be able to obtain further funding.

At the same time, a number of Covad's ISP affiliates have had trouble paying their connection fees. That's caused Covad to disconnect Internet Express and DSLNetworks customers. The company has directed those subscribers to visit an online "Safety Net" and sign up directly with Covad.

By snapping up dormant DSLAMs and marketing DSL directly to the commercial sector, O'Brien believes HSA can keep its footprint in check and not fall into the same financial trap.

"We'll focus on a smaller footprint and prove it out CO (central office) by CO, and get them to cash flow break even or better before we increase our footprint," he predicted.

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