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IP may force private line cost cuts

As more users want broadband services delivered via IP, the price for private line services could be forced down, according to a new study.

As more and more users want broadband services delivered via the Internet protocol, or IP, the price for private line services could be forced down, according to a new study.

A report just released by Insight Research says, "the price stability associated with the telcos' private line market is being threatened by the emergence of IP-based networks for long distance services, and xDSL [digital subscriber lines] and cable modems for local services."

Hence, the telcos could be forced to lower prices for private line services in the face of competitive pricing for IP-based services from the likes of Qwest Communications and Level 3 Communications, the study said.

Those lower prices will increase demand for private lines such as T1 and T3, however, according to "Private Line Services 1998-2003," and that will keep revenue from private lines growing at a rate of 8.8 percent through 2002. The research firm concluded that "depending on pricing, service flexibility, availability, and all other factors being equal, either [circuit-based private lines and fast-packet or IP-based services] could end up dominating the private line marketplace."

"Private line was put on the critical list in the mid-1980s when virtual private networking gave corporations an alternative to nailed-up circuits to tie their locations together," Robert Rosenberg, president of Insight, said in a statement. "Commercialization of the Internet in the mid-1990s breathed new life into the private line market as companies rushed to create intranets, but the emerging technology alternatives to PL means we've got to put the patient on the touch-and-go list again."