Qwest unties DSL from its phone service

Starting Feb. 28, customers throughout Qwest's mountain and western territories will be able to buy digital subscriber line (DSL) service regardless of whether they have a voice phone line with Qwest or not. Qwest is the first Baby Bell to offer such an option on a wide-scale.

"Forcing them to take a voice line is driving them to the competitor," Qwest Chairman Richard C. Notebaert said recently. "As long as we can make money at it, we should do this. Every time someone fights progress, at end of day they aren't successful."

Consumer groups said this is a positive move for the industry and they hope other incumbent service providers will follow suit.

"Bundles are a source of market power for companies using them," said Chris Murray, legislative counsel for Consumers Union, a consumer advocacy group in Washington, D.C. "Some customers like them for the convenience, but many don't want to be forced into buying an entire package, especially if they think they can get better service for one or more pieces of the bundle somewhere else."

Up to this point, the Baby Bells have typically offered DSL as part of a package with local phone service. Customers switching local phone providers risked losing their DSL service. This practice has been criticized by competitors and consumer groups. In some instances, competitors have actually petitioned local regulatory authorities to force incumbents to unbundle their services.

For example, in Georgia, MCI filed a complaint with the local regulators requesting that BellSouth be required to sell standalone DSL services to customers in the region where MCI was competing. MCI argued in its complaint that it was at a competitive disadvantage, because customers using BellSouth's DSL service were reluctant to switch local phone providers because they would be forced to drop their DSL service. MCI did not offer DSL in the region.

As a result, BellSouth now offers unbundled services in certain areas where it has been directed to do so. Joe Chandler, a spokesman for BellSouth, said the carrier is currently not offering this as an option to all of its customers, but that it is looking into it. Verizon, which serves much of the Northeast, also said that it is exploring the possibility of offering DSL separate from its voice services.

Reluctance expected
The practice of bundling DSL with local voice service is not something that these carries are likely to give up easily. The Bells make most of their money from local phone services. Recently this source of revenue has been under attack as cable operators offer voice, video and data services; long-distance providers compete in their regions; and wireless customers turn off their land lines. Bundling has helped these carriers hold onto to some of their customers.

"Businesses know that if you buy more than one service from them, you are less likely to go to another company," said Murray. "But the fact is that competitive markets breed choice, and we would hope that as more competitors enter the market that customers will be able to pick and choose the services they want from a variety of providers."

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Standalone DSL offerings could also help boost adoption of voice over Internet protocol (VoIP), which allows consumers to make inexpensive local and long-distance telephone calls over the Internet. Since many DSL customers have been tied to their local phone providers, they have had no incentive to try new VoIP services from providers, such as Vonage or Galaxy Internet Services. But now these customers can cancel their local phone service and use Internet calling instead.

"This fits very well with our broadband and VoIP deployment plans for 2004," Notebaert said recently. "It allows us to sell VoIP to any customer qualifying for DSL, regardless if they have phone service from Qwest."

Incumbents are starting to see that they will also need to offer VoIP. Qwest has already publicly stated that it plans to extend its VoIP offer--which is currently in limited trials--throughout 14 western states by the end of the year. With the unbundled DSL offer, customers will be able to get these services regardless of whether they have a Qwest local telephone line or not.

Qwest customers can purchase Qwest Choice DSL with MSN Premium Internet access without Qwest phone service for $50 per month. Customers who want to select an Internet service provider other than MSN can purchase Qwest Choice DSL Deluxe without phone service for $33.

In other DSL news, SBC Communications and Intel announced on Wednesday that Intel resellers will promote and sell SBC Yahoo DSL Business Edition and SBC Digital Services to its small and medium-size customers.

CNET News.com's Ben Charny contributed to this report.