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Commentary: SBC smart to ride voice-over-broadband wave

Many compelling economic reasons exist for the Baby Bells and smaller competitive local-exchange carriers to embrace voice-over-DSL technology.

    By Jay Pultz, Gartner analyst

    Many compelling economic reasons exist for the Baby Bells and smaller competitive local-exchange carriers to embrace voice-over-DSL technology.

    See news story:
    Baby Bell gives nod to voice-over-DSL

    Voice-over-DSL (digital subscriber line), or VoDSL, enables multiple voice calls and high-speed data to share the same DSL bandwidth on a single copper wire. Installing additional copper lines is not necessary to offer additional voice services over DSL. Therefore, the cost and time needed to provide services are reduced. The technology is maturing and will help Baby Bells such as SBC Communications to get the most out of their infrastructures.

    VoDSL is even more important to CLECs, those smaller alternative carriers made possible by the Telecommunications Act of 1996, which must obtain their copper lines from their competitors, the Baby Bells. Consequently, those alternative carriers want to minimize the number of copper lines that they need and maximize their revenue per line to improve profitability. VoDSL enables that by integrating voice and services on the same DSL bandwidth.

    Bells like SBC recognize that they must stay on top of this trend and improve the economics of their infrastructures. Furthermore, VoDSL paves the way for integrated voice and data applications over the Internet. Looking further into the future, VoDSL presages using DSL for much more than just Internet access: Future DSL applications will include video streaming, personal videoconferencing, interactive gaming and product distribution.

    Gartner's Dataquest has the following perspectives on VoDSL:

    • 2001 will be the year in which VoDSL begins to grow strongly. The market for VoDSL services will grow to $7.3 billion by 2004, with VoDSL lines in service growing from approximately 36,000 in 2000 to more than 14 million by 2004.

    • North America will lead the market for VoDSL worldwide. Even in 2004, 75 percent of VoDSL revenue will originate in North America. VoDSL will begin to grow strongly in Europe and Asia/Pacific when unbundling of the local loop in those regions provides alternative providers with the incentive to launch.

    • VoDSL will be ideally suited to the small business and high-end residential markets. By 2004, the residential market will account for 52 percent of commercial VoDSL ports. However, because of the higher proportion of lines and revenue per line for small business customers, the small business segment will provide revenue of $6 billion by 2004, representing 82 percent of total revenue.

    • The emergence of VoDSL will encourage a change in the distribution model for voice and data services. Traditional customer ownership by the Bells will be challenged by an array of alternative providers.

    • VoDSL could help increase the interactivity in e-commerce transactions. Voice commerce applications, such as push-to-talk for online purchase, or voice-enabled Web site customer service, could lure more customers.

    In conclusion, with a relatively small investment of $47 million, SBC's venture arm has funded additional competition and technology development among VoDSL suppliers that, in the long run, will only work to SBC's advantage.

    (For related commentary on telephony over the Internet, see TechRepublic.com-- free registration required.)

    Entire contents, Copyright © 2000 Gartner Group, Inc. All rights reserved. The information contained herein represents Gartner's initial commentary and analysis and has been obtained from sources believed to be reliable. Positions taken are subject to change as more information becomes available and further analysis is undertaken. Gartner disclaims all warranties as to the accuracy, completeness or adequacy of the information. Gartner shall have no liability for errors, omissions or inadequacies in the information contained herein or for interpretations thereof.