Start-ups mine demand for voice-over-DSL

But those aspirations are stunted by the slow launch of the technology thus far, according to analysts.

"(Voice-over-DSL) has had a slow uptake," said George Peabody, managing director for telecommunications research at the Aberdeen Group. "It's a great idea, but bringing any new service to market is difficult."

Investment bank US Bancorp Piper Jaffray projects there will be 200,000 voice-over-DSL (VoDSL) lines in service in the United States by the end of the year and 2.9 million by 2002.

VoDSL technology allows carriers to split a single high-speed digital subscriber line (DSL) Internet connection into multiple voice circuits, allowing one copper phone wire to carry several voice calls. The service is aimed primarily at small and midsize business customers, giving them multiple phone lines at low costs.

By also providing local phone service, smaller carriers can help stave off the lower profits generated by falling prices for long-distance voice and Internet access.

"Local phone service is remaining stable and, if anything, is drifting upward," said John Boersma, senior vice president of technology development for Mpower Communications, a competitive local phone company.

But ultimately, splitting a DSL connection into multiple phone lines allows smaller competitive carriers to interact as little as possible with the Baby Bell local phone giants for new lines. Competitors have long complained that the process of leasing lines from the Bells is too lengthy, hampering their business.

"What we want to do is minimize our dependence on the (local phone company) for delivering those phone lines," Boersma said.

Despite the lofty promises for VoDSL, just a handful of communications service providers offer it to their business customers. But many carriers are conducting trials.

Equipment manufacturers such as TollBridge Technologies, Jetstream Communications, CopperCom, General Bandwidth and Accelerated Networks continue to introduce devices that allow DSL to deliver voice calls.

This week, TollBridge said that Mpower purchased additional gear to run its VoDSL efforts. CopperCom unveiled a partner program with several operations-support-system software providers and network-management-system software providers to develop industry standards for the service. Separately, Jetstream signed a joint marketing deal with Smart Link this week to cooperate on VoDSL technologies.

Mpower, one of the few so far to aggressively introduce commercial VoDSL, began offering it to "thousands" of customers late last year, according to the company. Executives said the benefits include low-cost service for consumers and higher revenues for Mpower and other competitive local phone companies.

"There are huge benefits to voice-over-DSL," said Boersma. "What we can do is just put together a very comprehensive package of all the services (businesses) want. And it's a good value."

For example, during the first quarter, VoDSL represented 12 percent of Mpower's sales but only 4 percent of the company's installations, Boersma said.

"It dramatically improves (communications carriers') revenue and profit potential because their recurring costs are leasing facilities," said Conrad Leifur, a networking infrastructure equity analyst at US Bancorp Piper Jaffray. "So, what voice-over-DSL allows them to do is drive dramatically higher revenue per month by adding voice."

Analysts expect larger long-distance providers to launch VoDSL on a limited basis later this year--as early as the third quarter, according to Leifur. For example, WorldCom and AT&T are testing gear from Jetstream, company representatives said.

With SuperComm, a major networking industry conference slated for next week in Atlanta, industry observers expect to see more announcements and demonstrations from the technology providers. For example, CopperCom is expected to unveil a version of its equipment that requires only half the bandwidth--16 kbps--for voice compression, allowing carriers to offer twice as many voice lines or to reserve more network capacity for Internet traffic.

Still, few of the top 40 U.S. DSL providers offer commercial VoDSL service, said Stacy Boodman, an industry analyst at ARS, a computer and networking market research firm.

"We see a lot of equipment coming in but not many carriers implementing it," she said.

However, according to Jetstream, 11 carriers have deployed VoDSL using its gear, and 31 are testing it.

"In the same way that DSL started slowly, voice-over-DSL seems to be getting a slow start," said Boodman. "The hardware guys are there, but the carriers haven't really done much deployment.

"Honestly, I think (the carriers are) having trouble even rolling out DSL in the first place, so why would they offer other value-added services when they can't even roll out DSL in a timely manner?" Boodman asked.