RealTime IT News

SBC DSL Promo Puts Squeeze on ISPs

Good news for consumers looking to get a great price on digital subscriber line service in the SBC Communications, Inc. service area.

New existing customers may sign-up for basic DSL Internet service from Southwestern Bell Internet Services, Pacific Bell Internet Services, or Nevada Bell Internet Services for under $40 a month.

The SBC (SBC) deal includes high-speed DSL access, Internet service, a free DSL modem and free installation, when customers agree to a one-year term of service.

The SBC promotion launched on Valentine's Day, much to the surprise of its 140 national and regional DSL resellers.

Pacific Bell Internet is SBC's California affiliate offering the DSL promotion. Pacific Bell has about 70 ISP DSL resellers in its service area that are being squeezed by the PBI deal.

Ariel Communications Group, Inc. is an independent Internet service provider based in Orange County, Calif. Ariel supplies hundreds of local businesses with digital connectivity and high-speed DSL services.

April Josephson, Ariel Communications Group president, said she signed up with Pacific Bell to become a DSL reseller after the SBC subsidiary cancelled its ISDN reseller program.

In order to set up DSL service, Ariel had to order an ATM T1 circuit before it could sign-up any DSL subscribers. Switch setup cost $1,000 and monthly fees for the T1 feed are about $900 a month. At the time, SBC restricted resellers from connecting to all of its Central Offices. Josephson had to handpick five COs out of 32 possible Pacific Bell locations to provide Ariel DSL service.

Under Ariel's contract with Pacific Bell, Josephson is charged $39 a month for each DSL subscriber. Ariel also has to pay $198 for every DSL modem it installs. SBC's current DSL promotion through PBI was not extended to its Pacific Bell DSL resellers, which left Ariel and 70 other California ISPs unable to compete with the deal.

ISPs like Ariel are in a bind because they lose at least $200 on each DSL account they activate if they try to compete with the SBC deal and hand out a free DSL modem. If the ISPs don't match the deal, they may fail to sign-up at least 10 new customers each month. If a low-volume DSL reseller fails to meet its quota, SBC could cancel the reseller's contract.

Adding insult to injury, Pacific Bell also adjusted its Web site to feature the low-price DSL deal where its ISP DSL resellers were once showcased.

But don't count Ariel out of the DSL business. The independent ISP also resells GTE Internetworking DSL access.

Legal recourse to correct the competitive damage done to the independent ISPs is limited. Ariel does not intend to file a complaint with the California Public Utilities Commission because the state agency can only enforce DSL tariffs, and none have been violated.

The SBC-Pacific Bell promotion is legal because the low-price DSL deal is being offered through Pacific Bell Internet. Because Ariel is a reseller for Pacific Bell DSL, which is under a different tariff than Pacific Bell Internet, there's no violation of any "equal treatment for competitors" clause on tariffs.

The CPUC may review Ariel's forthcoming complaint, but the state agency does not have standing to remedy the anti-competitive nature of the PBI promotion.

The Federal Communications Commission applied the same proposed conditions by which PBI may legally usurp the California DSL market from competitors to the SBC-Ameritech merger.

As a part of the SBC-Ameritech