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IBM, SBC in consumer DSL partnership

Big Blue will begin offering Internet access through SBC's digital subscriber line service in custom-ordered Aptiva PCs, at a low price.

    IBM plans to deliver high-speed Internet access at a low price to consumer PC customers, in partnership with local telephone firm SBC Communications.

    Beginning next month, custom-ordered Aptiva PCs will come with the ability to tap into consumer digital subscriber line (DSL) service in SBC's 13-state service area, or to about 10 million customers, according to IBM executives. Initial service will be available in Arkansas, California, Kansas, Missouri, Nevada, Oklahoma and Texas. Six other states will join the program early next year.

    The two companies recently concluded a service trial in the San Francisco Bay Area.

    "One-stop" DSL access will be important in winning PC customers who value Net access, according to John Yengo, a vice president in IBM's personal systems group.

    "We wanted to provide the assurance to our customers the service would work," said Yengo. "We've gone out testing with the six or seven [Baby] Bells under the SBC umbrella, so that when the consumer gets his modem, now you know it's compatible."

    The deal comes as IBM continues to revamp its consumer PC business. The company recently shifted its emphasis from retail to direct sales to consumers, the division having lost nearly $1 billion in fiscal 1998.

    IBM is not the first PC maker to cut a deal for consumer DSL service, but it is the largest company so far to jump into the market. MicronPC has already partnered with Covad Communications to deliver consumer DSL services.

    "It's where the industry is going. Every consumer PC player wants to offer a higher level of Internet access than the next," Technology Business Research analyst Joe Ferlazzo said.

    Consumer DSL technology is up to 40 times faster than a dial-up 56 kbps modem. Like analog modems, DSL uses telephone lines to connect users to the Internet.

    SBC will offer two grades of service. The standard DSL package offers a downstream rate of between 384 kbps and 1.5 mbps, depending on local conditions, and 128 kbps upstream for $49.99 a month with a one-year contract.

    The pricing is unusually aggressive for DSL. Bell Atlantic, for example, sells its 1.5 mbps service for about twice as much as SBC's service. MicronPCs co-branded Covad DSL costs $79.95 for 384-mbps downstream service.

    IBM's partnership with SBC differs from rival PC makers offering DSL access, namely MicronPC and Compaq Computer. MicronPC does not build the modem into the PC, but lets Covad provide one as an external device connected to a computer's network card. Compaq, which has offered DSL modems on Presario PCs for more than a year, decided not to lock in with a single provider.

    "IBM's approach makes it easier for the consumer, which is what it's all about, making it easier to connect," Ferlazzo said. "On the other hand, AOL and Gateway make it very easy to connect, so in that sense IBM is behind some of its competitors."

    Mike Larson, senior vice president and group general manager of Compaq's consumer division, said his company has taken "a more regional approach" in what he referred to the "triple-play program." Compaq equips Presario consumer PCs with the basic technology for cable, satellite or DSL high-speed access, but relies on local carriers to provide access.

    "We're also looking at three-way partnerships involving retailers," said Larson, who sees the positioning as vital to delivering the best service to consumers. "The No. 1 reason consumers are buying home PCs is to get on the Internet. The one thing they want more than anything when they're on the Internet is a bigger, fatter pipe."

    Customers who purchase an Aptiva PC with a built-in DSL modem are eligible for the service from SBC, which will wave installation charges. After ordering the Aptiva direct from IBM, the customer is then connected to SBC, which arranges the DSL service, according to the company.

    The desktop systems also will include a standard 56-kbps modem, which will be connected to the DSL modem via a jumper cable.