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Price cuts raise stakes in DSL race

Telcos are cutting prices for digital subscriber line services to compete, but customers complain that the high-speed services just aren't as available as the companies' claim.

In a competitive move, telecommunications companies are cutting prices on digital subscriber line technology, but many potential customers still can't subscribe to the high-speed service.

Baby Bells, plus a handful of new upstarts, are quickly upgrading their phone systems to offer DSL, an "always on" technology that delivers data at high speeds using regular phone lines. With the high-speed service, users can talk on the phone and surf the Net simultaneously.

Just today, Bell Atlantic cut prices on its residential DSL service by $10 to $49.95 per month. Bell Atlantic's new pricing is in line with that of SBC Communications, which recently cut its consumer prices for DSL.

Several recent deals, marketing alliances, and price cuts like these have raised interest in DSL, the primary broadband alternative to cable modem services. But despite reports of increased rollouts in some markets, many consumers are frustrated that DSL services are still limited in many areas.

"The providers haven't done a good job of educating customers so that their expectations are not too high," said Claudia Bacco, a DSL analyst with TeleChoice, a communications industry consulting firm. "If they're not prepared before cable modems move into an area, then cable definitely stands a chance to keep its leg up and expand on that lead."

Analysts and industry executives say a lack of qualified technicians could limit rollouts of DSL technology. Additionally, customer service and sales people who aren't well versed in DSL, or can't give consumers adequate information about availability, may frustrate potential customers.

"There is a huge shortage of technicians for DSL," said Jim Entwisle, Pacific Bell's San Francisco Bay Area regional manager for network operations, in a recent interview.

Pacific Bell has taken a couple of shots for being slow to install the service, despite claims that 90 percent of the city of San Francisco has access to its DSL service.

The company, a subsidiary of SBC, has logged 1,800 calls per day statewide inquiring about DSL since cutting its prices, Entwisle said. "The demand is extreme," he said. "So far we've been able to keep up. But our existing capacity is being challenged."

Although most of the Baby Bells decline to release DSL subscriber numbers, analysts say US West and GTE appear to be leading the pack with BellSouth, PacBell, and Bell Atlantic trailing behind.

By most accounts, however, DSL still claims fewer than 100,000 customers nationwide. In contrast, more than 500,000 customers used cable modems to connect to the Net in the United States at the end of 1998, and the industry estimates some 1 million users will sign up by the end of 1999.

Even the most aggressive of the DSL service providers has a limited number of customers. For example, Covad Communications, one of the leading upstart DSL providers, had installed just 4,000 digital subscriber lines as of January 31, according to a recent Securities and Exchange Commission document.

Joan Rasmussen, a spokeswoman for Bell Atlantic's InfoSpeed DSL service, said the company plans to have 8 million homes wired by the end of 1999 and 16 million by 2000. Bell Atlantic has 21.5 million households in its territory, which spans from Maine to Virginia.

"We are rolling it out as fast as we can, but there are limitations to the technology," Rasmussen said. "We know there is great interest in the service and we have stepped up our efforts."

Distance is key with DSL. The quality of the high-speed service is affected depending on how far a customer is from the local phone company's central switching facility. And if a customer's home or office is more than three miles away from that hub, DSL services won't work at all. Analysts estimate that only 60 percent of phone lines today are capable of receiving DSL service due to these factors.

Since the technology is nascent, juggling marketing, installations, and central office upgrades has been difficult, analysts said.

"All the RBOCs [regional Bell operating companies] are trying to balance training technicians with rolling out the service," David Eiswert, a DSL analyst for the Strategis Group, said. "There is a huge learning curve; you can't underestimate that."

Jumping the gun
The telephone industry admits that marketing the high-speed DSL services has also been a challenge.

"There are customers who are not in qualified areas who have heard about the service and want it, and if it ends up that they can't get it, then they're disappointed. There's no question about that," said Ted Creech, a spokesman for BellSouth.

Taking out newspaper ads and radio spots is likely to lead to a discrepancy between marketing and reality, analysts said, which could lead to increased consumer dissatisfaction.

"They don't want to promise the service to people they can't deliver service to because that's a fast way to poor customer relations," said Eiswert. "The last thing they want to do is make empty promises."

Despite being cautious about marketing strategies, thousands of potential DSL customers who have heard about the technology and the recent price cuts have flooded telecom companies with requests for service.

"It comes down to a very basic relationship between supply and demand," Eiswert said. "They don't want to market the service when the reality is there are only select central offices where they can roll this out."