DSL Fuel

Does DSL have enough gas to overtake cable in the broadband race?
Magazine Contributor
3 min read

This story appears in the February 2001 issue of Entrepreneur. Subscribe »

With dropping prices and growing availability, analysts now project DSL to overcome cable modems in number of broadband subscribers. In October, for example, Cahners In-Stat Group predicted DSL subscriptions in North America-2.9 mil-lion at year-end 2000-would jump past cable to 8.6 million by 2003.

One reason for the projections is that DSL lines are beginning to reach farther into the suburbs. While most lines now extend only 12,000 to 14,000 feet from each central office, new line-extension technology is increasing that to 18,000 to 24,000 feet. Furthermore, new equipment is making DSL compatible with the digital loop carrier equipment used in many outer suburbs.

DSL subscriptions are also being fueled by lower prices. Over the past year, major DSL providers have dropped the price of basic monthly packages (typically 384Kbps to 640Kbps downstream and 128Kbps up) from a minimum $49.95 down to $39.95, about the same as cable-modem service. What's more, providers typically rent the required modems for free and run frequent promotions that reduce installation fees.

The lower prices are due primarily to cheaper equipment, which, in turn, stems from a more competitive vendor environment. Compared to cable, there are more service providers, a more diverse selection of services and technologies, and a faster-growing global market. In addition, over half of new DSL customers can choose the cheaper option of user installation, something the cable providers are only beginning to introduce.

"It's huge to be able to do self-installs," says Cahners In-Stat Group analyst Mike Lowe. "The fewer trucks and technicians, the cheaper it gets."

Eric S. Brown, a regular contributor to PCWorld.com, is a freelance writer living in the Boston area.

Whose Line Is It, Anyway?

Compared to the dial-up realm, where thousands of ISPs still compete, the consumer DSL market doesn't offer many choices. But weighed against the local monopolies of cable, DSL seems like a wide-open bazaar. The four remaining local phone giants-BellSouth, Qwest, SBC and Verizon-have a huge advantage but now face increasing competition. Recent big gainers include national ISPs, business-class DSL providers and long-distance firms. And thanks in part to line-sharing rules issued by the FCC in late 1999, more competition is on the way. The rules force the Bells and other local telephone companies to share their phone lines with other DSL competitors so the smaller rivals don't have to install their own.

Line-sharing should have a big impact this year, says Adam Guglielmo, a DSL analyst at TeleChoice Inc. "We could see widespread $29.95 price points by the end of 2001."

As basic DSL pricing approaches dial-up levels, get ready for new services that boost the price once again. This year, we'll see "gateway" devices, sophisticated DSL modems equipped with routers that support multiline Voice-over-DSL and home networking support. Cable-modem providers are heading in the same direction but not as quickly. DSL may not have better technology, but its more competitive environment should bring lower prices and greater innovation for years to come.

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