PACBELL Unveils Calif. ADSL Plan

Author:
Updated:
Original:

Pacific Bell last week unveiled a commercial ADSL strategy
that should leave California cable operators breathing a little easier than their
counterparts in many other regions of the country.

The SBC Communications Inc. subsidiary said it would extend
asymmetrical-digital-subscriber-line service to more than 200 California communities this
summer, with a marketing plan targeting businesses and telecommuters, rather than the
mass-consumer market. PacBell's lowest-priced service costs $10 to $20 per month more than
similar low-tier charges set by carriers with more consumer-oriented strategies. The
California telco is charging $59 per month for access at 384 kilobits per second
downstream and 128 kbps upstream, excluding Internet-service fees.

BellSouth Corp., for example, is charging $45 per month for
a 1.5-megabit-per-second ADSL service that it plans to introduce in seven markets this
summer. GTE Corp., U S West Communications and Ameritech Corp. are also charging in the
$40-per-month range for their services, some of which are pegged for lower speeds than
BellSouth's.

Bell Atlantic Corp., the only major carrier not to announce
ADSL services, is planning to do so shortly with a strategy targeted more toward the
consumer market than toward businesses, said the telco's spokesman, Larry Plumb.

"We expect businesses to want the service, but we
don't want to market it as a business-class service because it won't meet all of the
quality-of-service standards that people associate with business-class service," he
added.

But SBC's take on the market opportunity is different,
based on the experiences that it has had in offering service from 16 central offices in
the San Francisco Bay area. That service -- which has been operating since November at
slightly different price points and speeds than the commercial product that was just
announced -- is classified as a trial, even though it is offered commercially by the
carrier and by a number of CLECs (competitive local-exchange carriers), as well.

"What we've learned from our market trial is that the
key applications for ADSL service are business-related," said Michael Powell, SBC's
marketing director for DSL services. "We recognize that there is some percentage of
Internet hobbyists who want more bandwidth, so we'll evolve service over time, with
respect to price points and access speeds, to meet this demand, as well."

Along with the low-tier service, PacBell will offer two
other speed tiers -- one operating at up to 384 kbps in each direction and priced at $99
per month, and the other pegged at 1.5 mbps downstream and 384 kbps upstream and priced at
$189 per month. Pacific Bell Internet Services, the carrier's ISP (Internet-service
provider), charges anywhere from $30 per month for Internet access at the lowest tier to
$339 for small offices and more for big companies.

PacBell is also charging more than most other carriers for
installation and modems, starting with a one-time fee of $125 for provisioning a line with
DSL from the central office. Other one-time charges vary, starting at $440 for a modem and
no charge for premises installation if the customer needs no help; $550 for the modem and
over-the- phone assistance with installation; and $660 if on-site assistance is required.

SBC, which has also been operating an ADSL trial in Austin,
Texas, is preparing to roll out services on a wider scale there and in the Dallas-Fort
Worth, Texas, area, and possibly in other parts of the state, a spokesman said.

The carrier anticipates that on average, 60 percent of the
lines from any of the 200 central offices that will be equipped to deliver ADSL in
California this summer will qualify for service, officials said.

"In most cases, we'll be able to qualify callers on
the spot. And in instances where we can't give an immediate answer, we'll have an answer
within no more than 24 hours and, hopefully, within four hours, which is our
objective," said Mike McLeland, vice president of business-service operations for
PacBell.

"Once we tell them that they are qualified, they'll
have service within seven days," he added.

Customers with lines that don't qualify -- either because
they are more than 16,000 feet from the central office, or because there are too many
signal impediments from line coils or bridge taps on their lines -- might be able to get
service by ordering second lines, if they are close enough to the central office.

"We expect about 80 percent of our customers to take
ADSL on the first line, with about 20 percent using second lines," Powell said.

PacBell's expectation that 40 percent of its customers
won't be able to get ADSL service reflects a conservative approach to record-keeping and
marketing, rather than any fundamental limitations of the technology, said Jurgen Lison,
ADSL-product manager for Alcatel Telecom, the supplier of PacBell's system.

With a change in policy, the carrier could easily qualify
75 percent to 80 percent of its customers, and it could connect most of the remainder by
conditioning the unqualified loop, much as it does with ISDN (integrated services digital
network), he added.

"They've set the limits much stricter than the
technology requires," Lison said.

Because PacBell must make unbundled loop available to
CLECs, which can provide their own ADSL service over those loops, the carrier has opened a
path to a higher percentage of qualification for the CLECs' ADSL customers than for its
own, Lison said.

"PacBell conditions the loop that it leases to CLECs,
which would seem to put its own [ADSL] operation at a competitive disadvantage," he
added.

Another major factor in the qualification limitation is the
presence of T-1 lines -- many of them unused -- in wire bundles, as they present an
interference problem with ADSL lines in the same bundle, Lison noted. Better
record-keeping and a setting of priorities limiting the number of unused T-1 lines in any
given wire bundle would free up more capacity for ADSL, he said.

While PacBell's primary target is the business user, the
telco, like other carriers, is not yet making use of its ATM (asynchronous transfer mode)
delivery format to support the advanced-service capabilities that ATM is meant to offer.

"We'll add VBR [variable bit rate] and CBR [constant
bit rate] at some point in the future, but we're not projecting when that will be,"
Powell said.

This means that variations in service capabilities to be
offered by ISPs will depend on the QOS enhancements that are embodied in the layer-three
parameters of the native IP (Internet protocol) format.

Nonetheless, officials said, it's worth PacBell's while to
incur the bandwidth overhead cost of ATM (estimated by experts to be in the range of 17
percent to 20 percent), so that in the future, it can add value to services by using VBR
and CBR, which allow assignment of QOS parameters to be made at the layer-two switching
level.

"By deploying ATM now, we're building a base for
growing enhancements in the future," said Jim Thurwalker, corporate manager of
product development for SBC.

Once those enhancements are added to the carrier's ATM
modules -- including the ADSL modems -- via software upgrades, the company will be able to
create tariffs for various types of services offered through the network, thereby
competing with the ISPs in some areas of value-added service.

Related