Carriers push voice over high-speed DSL

Traditional copper phone wires have served as the method for transmitting voice calls for more than a century. But many companies have worked diligently to pack data onto those same phone wires, particularly as the Internet has grown in popularity.

Now those same companies plan to use new technology to make phone lines do an old trick--carry voice transmissions. Many startups are preparing to use digital subscriber lines (DSL), a technology which allows for high-speed data transmissions over standard phone lines, to offer as many as 16 voice lines over a single copper wire.

The planned voice-over-DSL (VoDSL) offerings, now in the testing stages, promise to give small and medium-sized businesses more phone numbers and Internet access at a much lower cost. The move to provide such technology comes as various nascent local phone companies introduce their own lines to compete with the entrenched Baby Bells for a variety of telecom services.

"It's primarily driven by the new local phone companies," said Ken Kolderup, director of marketing for Jetstream Communications, an aspiring DSL-focused equipment provider. "Finally, you're going to be able to experience the true nature of competition."

Voice-over-DSL could prove to be another selling point for alternative service providers such as Covad Communications, NorthPoint Communications, and Rhythms NetConnections, and for a slew of emerging local competitors like Nextlink Communications. It could also prove to be a large sales opportunity for network equipment companies.

"This really does expand it and make DSL more compelling to a wider range of customers," said Charles Carr, a DSL analyst at market research firm Dataquest. "It makes it a very viable small business technology."

Because the market is new, solid growth projections or expected voice-over-DSL revenue numbers are hard to come by. But some analysts said the technology will be in high demand and that the new market clearly will save money for service providers, if not for consumers.

"The market is big in terms of lots of small businesses and home offices that would like to have additional lines," said Jeannette Noyes, research manager for residential and small business communications at International Data Corporation.

IDC expects small businesses to order nearly 2 million new access lines, while residential users will require about 6 million new access lines during 1999. Small businesses spent more than $53 billion on telecommunications services in 1998 and are more likely to switch providers based on reduced costs, according to a recent IDC survey.

The numbers point to the potential for alternative phone providers to cut into the traditional local phone market over the next few years by using DSL, a technology many of the telco newcomers are already embracing.

These carriers hope to gain the communications dollars spent by consumers and businesses by offering a wide array of services, often called a "one-stop shop" approach.

"The game here is: How do you own the customer?" observed Cynthia Ringo, chief executive with CopperCom.

How does it work?
DSL technologies allow a user to speak over a phone line while surfing the Internet. But new voice-over-DSL technologies allow up to 16 phone lines to be crammed onto one phone wire by splicing the "digital spectrum" normally reserved for data transmissions.

Therefore, the more phone lines a company wants, the slower its Internet download capabilities become. Conversely, the fewer additional phone lines there are, the more bandwidth is reserved strictly for data.

For example, a small retail shop could choose to install five voice lines for incoming orders in addition to a moderately fast Internet connection. Or, a residential user could have one DSL line with two extra phone lines for talkative teenagers and high-speed Net access for the family.

"A small business is all about simplicity. They're paying separately for all these lines at $30 to $35 a month plus long distance charges," said Jim Greenberg, chief network architect for Rhythms.

Greenberg estimates small businesses could save about 30 percent to 40 percent on additional voice lines and get it all from one company.

"This is a breakthrough technology that will have a major impact," he said.

"Voice-over-DSL really is going to be the killer app for DSL," said Shannon Pleasant, a DSL analyst for Cahners In-Stat Group.

Pleasant said she expects VoDSL to save the Baby Bells as well as competitors money by eliminating the need to string additional copper lines for small business customers. "Whether there's a cost benefit passed on to the user, I don't know," she said. "The benefit of voice over DSL from a cost perspective may be realized by the [service provider] rather than the consumer."

Early stages
But some cautioned that VoDSL still has some hurdles to overcome.

"Although voice over DSL is exciting, there isn't that much equipment yet," Pleasant said. VoDSL equipment systems are proprietary and don't work with other systems. Additionally, the technology demands more expensive real estate space in crowded phone company central offices, she added.

But that isn't stopping service providers and equipment makers from testing early voice-over-DSL offerings.

Earlier this month, Rhythms and MCI WorldCom demonstrated a VoDSL trial in New York using equipment from Cisco Systems.

Other equipment providers in the market include Cabletron Systems' FlowPoint subsidiary, Ascend Communications, and start-ups like Tollbridge Technologies and CopperCom, among others.

Jetstream recently announced high-profile licensing agreements for its technology with both Alcatel and Nortel Networks. CopperCom today closed a third round of funding, totaling $17.5 million.

Copper Mountain Networks and Redback Networks, two equipment upstarts focused on other portions of the DSL market, recently floated successful initial public offerings on Wall Street.

Another network operator, Covad, also announced cross-country trials of VoDSL technology earlier this month.

"[Voice-over-DSL] could be huge," said Covad chief executive Bob Knowling. "If you think about the small business market, the cost of telephony and high-speed access and the full array of features that a small business pays, it's one of the largest expenses in their total overhead...It just changes the game."