The huge demand for high-speed, or "broadband," Internet connections has made keeping up with orders and installations a difficult task, making for harsh headlines and frustrating some consumers. Service providers are preparing their internal systems and software to handle more customers than ever before, but in some cases those changes mean enduring short-term headaches in hopes of long-term improvements.
NorthPoint's new Operational Support System (OSS) software, a "back office" application that manages and tracks order fulfillment, was installed in April to help the company launch digital subscriber lines (DSL) more quickly. The software is intended to electronically connect NorthPoint with the Baby Bell local phone companies from which it leases phone lines, and its ISP reseller partners that sell directly to businesses and consumers, reducing human intervention and the overall installation time.
But glitches with the new system have led to DSL provisioning delays and caused at least one ISP partner to address the situation with its customers.
In a letter to new customers awaiting installation, MegaPath Networks chief executive Harry Taxin indicated that standard promises of activation within a month won't be met and that accurate information about the status of orders will be unavailable for two weeks. As a result, MegaPath is offering two months of free service to keep customers happy.
"Unfortunately, NorthPoint has encountered several major problems implementing this new system," Taxin wrote. "The resolution to these problems has taken much longer than originally anticipated."
Industry observers believe the issues of keeping pace with demand span the entire broadband industry and are not limited to any one company.
"There's a broad supply issue in the DSL space," said Dan Foster, chief executive at Phoenix Networks, a reseller of NorthPoint and Rhythms services. "It's a supply-constrained, not a demand-constrained, market."
As the local phone giants such as SBC Communications and Bell Atlantic, which have an enormous base of customers, begin to quickly install hundreds of thousands of DSL connections, competitors such as NorthPoint, Covad Communications, Rhythms NetConnections and other smaller contestants are scrambling to quickly counter the Bells' assault.
When Covad implemented a similar system earlier this year, the company saw a 50 percent reduction in DSL connections provisioned during a seven to 10 day period, analysts said. But the company has since become more efficient at managing orders and provisioning lines.
Similarly, NorthPoint has faced some necessary hiccups as it transitioned to the new system, but now is capable of processing double the orders per day, according to executives. ISP sources said they expect Rhythms to introduce a similar system within the next month.
"It sounds like (NorthPoint's) productivity has increased," said Brent Bracelin, a communications research analyst at Pacific Crest Securities. "The bottom line is there were concerns that Covad wouldn't meet expectations (when the company installed its similar system), but Covad beat the expectations."
The companies believe their new back-office systems will allow them to launch high-speed connections faster than ever before--once they work out the kinks.
"I don't see the demand easing up, so the goal is to scale this as quickly as possible," said Joyce Kim, vice president of corporate strategy and acting chief operating officer at NorthPoint. "You know it cannot scale by processing orders manually, so we're tightening up the process and mechanizing it."
Kim said NorthPoint "is comfortable" with Wall Street's projections for DSL connections. Most analysts expect the company, which finished the first quarter with 41,300 lines installed, to end the second quarter with about 63,000 lines. The analysts also believe the company will end the year with about 150,000 to 155,000 DSL connections in service.
NorthPoint's new system will be good for the company, just as Covad's was, Bracelin said. He added that the company will begin to provision many more DSL connections during the second half of the year once the new software is fully integrated, new federal line sharing rules are in place and NorthPoint's deal with Microsoft and RadioShack gains momentum.
Bracelin, who maintains a "strong buy" rating on the three major national DSL providers, expects the company to add 10,000 lines per month during the third quarter and 20,000 lines per month during the fourth quarter.
"I didn't expect them to really make a big jump until later this year," he said. "They're right on track with that progress."