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Better broadband prices for businesses

Prices for SDSL service, a popular form of high-speed Internet access for businesses, dipped in 2001, even though the cost of consumer DSL service has risen.

Prices of a popular form of high-speed Internet access for businesses dropped moderately throughout 2001, thanks mostly to heated competition among providers.

According to a study released Monday by information technology research firm ARS, symmetric digital subscriber line (SDSL) prices dropped 5 percent from January 2001 to December.

SDSL service provides the same connection speeds for data traveling from the Internet to a PC and vice versa, and many businesses see it as a popular alternative to more expensive T1 lines. SDSL service, which relies on copper-wire telephone lines to deliver data to computers, is often provided by giant telephone companies such as AT&T and the Ameritech division of SBC.

The study by La Jolla, Calif.-based ARS, which will be available for purchase in late February, concludes that competition among phone companies and start-ups is keeping prices down for SDSL and other business connections.

Roughly one-third of DSL providers that ARS tracked had changed prices for SDSL rates--many of them lowering prices for an average decrease of 5 percent. Only 8 percent of the industry's major business SDSL service providers offering services in both January and December increased all of their monthly service rates.

By contrast, non-corporate customers and home-based businesses that rely on asymmetric digital subscriber lines (ADSL) or cable modem access are seeing price increases. AT&T and SBC Ameritech raised ADSL prices 25 percent to $50 a month earlier this year, and even cable modem access for millions of Excite@Home customers had crept up to $46 per month by late last year.

The price increases are largely the result of stalled competition. One-third of DSL providers that ARS began tracking in January 2001 were bankrupt, acquired or otherwise out of the DSL business by the end of the year, according to the study.

"Not surprisingly, these data do not follow the trend of increasing prices that we have found in the consumer broadband market," ARS analyst Mark Kersey said. "The presence of competing access technologies such as T1 lines has kept business SDSL rates in check. Clearly, when compared to the consumer market, strong competition in the business Internet access market has been advantageous for buyers of those services."

The study comes two months after the stunning demise of high-speed cable modem provider Excite@Home, which is in the process of distributing assets to cable partners in preparation for a Feb. 28 shutdown. The Redwood City, Calif.-based company was one of the highest-profile stars of the Internet stock bubble in the late 1990s, but rival cable companies found it increasingly easy to duplicate Excite@Home's fiber-optic network at lower cost.