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BellSouth picks Alcatel and Redback for broadband

The carrier will use their equipment to boost DSL speeds and one day serve video into homes.

BellSouth on Tuesday said it has chosen telecommunications equipment makers Alcatel and Redback to boost broadband Internet speeds over its aging copper wire network.

The carrier said it will use Alcatel's 7330 DSLAM equipment and Redback's SmartEdge 800 Service Gateway to increase bandwidth throughout its network. Once in place, the equipment is expected to help BellSouth's broadband connections reach 12mbps--and 24mbps for homes with the company's bonded-pair lines, with two copper wires being served into each location.

The companies did not disclose terms of the deal, nor when the upgrades would be completed.

With the bandwidth upgrade, BellSouth hopes to eventually offer a package of services over a fast Internet pipe. Like the other Bells--Qwest Communications International, SBC Communications and Verizon Communications--BellSouth plans to sell "triple-play" packages that include cable-TV-like programming, Internet access and voice calling.

All of these investments are being made with one thing in mind--competition from the cable industry. Cable giants, already veterans in TV programming, have a lead over the Bells in broadband Internet access, and are making inroads into the Bells' core voice market. Companies such as Cablevision, Comcast and Time Warner Cable have launched or plan to launch Net phone service to turn up the heat on the Bells.

"Once you have customers with three or four services, the customer's desire to switch is much lower," said Simon M. Leopold, an equity analyst at Morgan Keegan & Co.

To get there, the Bells are investing billions of dollars to upgrade their networks with fiber-optic lines.

Because of cable threats and migration to wireless phone services, the Bells have watched their wireline phone business erode. The telecom industry is beginning to consolidate, with SBC's recent proposed acquisition of AT&T and Qwest's possible acquisition of MCI expected to shake things up.

The Bells' push into bandwidth upgrades has been positive for equipment makers such as Alcatel and Redback. Alcatel already has deals with SBC, including a $1.7 billion agreement to help build SBC's Internet video service.