SBC Communications said today it would speed its rollout of high-speed Internet access in California and throughout Southwestern Bell's five-state service area this year.
The plan, which would also cut prices for the broadband service, is one of the most aggressive moves yet into the high-speed Net business by the Baby Bells. But it also marks a challenge to federal policymakers, who have proposed new regulations that company executives say would slow down their rollout.
As outlined today, SBC's $150 million investment would make high-bandwidth asymmetric digital subscriber line (ADSL) service available to 8.2 million residential customers and 1.3 million businesses by the end of the year.
DSL technology allows existing phone lines to be used for a combination of high-speed Internet and traditional phone service, with only minimal investments made at the central telephone office and at the user's end.
Depending on the customer's distance from the so-called central office, the service can provide download speeds of up to 6 Megabits per second (Mbps), or about 50 times faster than today's 28.8-Kilobit-per-second (Kbps) modems.
SBC also said it plans to cut service prices in order to compete more directly with cable modem access, which has taken an early lead in the consumer market. Prices will start at $39 for the DSL service alone, or $49 with Internet service through the Baby Bell's ISP.
"SBC is moving fast to provide the advanced, high-speed data services our customers want," said SBC CEO Edward Whitacre in a statement. "We believe ADSL will become the preferred high-speed Internet access technology for our customers."
Analysts said the move could spur customers to make the move to DSL, which has lagged behind other high-speed access technologies, particularly in the price-sensitive consumer market.
"That price is a signal that they want to be residential players," said David Eiswert, a broadband analyst with the Strategis Group.
Eiswert said that about 475,000 U.S. customers had high-speed cable modem access by the end of 1998, compared with fewer than 60,000 customers with DSL Internet access. The cost of cable internet service now averages about $40 a month, compared with DSL at about $60 a month, plus a $20 to $30 fee for Internet service.
Challenging the FCC
But behind SBC's splashy announcement today was a veiled message to the Federal Communications Commission, which is expected to rule on how to regulate the Bell's high-speed Internet services later this month.
The FCC has proposed a plan under which the Baby Bell companies, including SBC, would be able to offer DSL service only if they also sell it at discounted wholesale rates to competitors for resale, or set up financially separate subsidiaries for the service.
The Bells have argued, with the support of computer companies such as Compaq and Intel, that this proposal would be expensive and decrease their incentive to invest in DSL rollouts.
If the FCC does decide to go this route, today's plans for cheap high-speed residential Net service could be negatively affected, SBC executives say.
"I would say it would slow it down," said Brian Posnanski, an SBC spokesman.
The uncertainty also holds for companies offering cable high-speed access. Critics of the merger between AT&T and Tele-Communications Incorporated have asked the FCC to require the companies to open their cable systems to ISPs other than @Home, in which TCI is the largest partner. The companies have said allowing competitors to use their cable system would undermine @Home and the merger itself.
The FCC itself is under fire from Congress, where some members have said its actions are stalling the rollout of high-speed services like DSL.