BellSouth: A DSL Success Story

Wall Street analysts across the board were pleased at Bell South Corp.’s
announcement Thursday it had met digital subscriber line
(DSL) estimates for 2001, netting 405,500 new customers and covering 70
percent of its 63 markets with high-speed capability.

With 620,500 customers, made up of 80 percent residential users and 20
percent business-class services using its 1.5 Mbps asymmetrical DSL
(ADSL) offering, BellSouth has proven that DSL is still a viable product
for the nation’s telecommunications providers and shouldn’t be abandoned.

That stands in marked contrast to the other three Baby Bells, Verizon
Communications , Qwest Communications and SBC
Communications — who have either abandoned DSL entirely
or significantly slowed their deployment rate in their coverage areas.

What’s the secret of BellSouth’s success?

According to BellSouth executives, successful self-installs (called virtual
truck rolls) and a heavy emphasis on remote terminals are the
cause. Remote terminals are mini-central offices (CO) that let telcos
extend the range they can provide DSL service, which is limited mainly by
distance.

RTs, said Ralph de la Vega, outgoing BellSouth president of broadband and
Internet services, played a key role in the company’s 188 percent DSL
growth rate for the year, a rate higher than any other DSL or cable
provider in the nation.

“BellSouth has a make up of customers such that 61 percent are served by
central offices and 39 percent out of RTs and we had to get at that 39
percent to be able to hit our target,” de la Vega said. “By design,
BellSouth, for over a decade now, has been designing the maximum loop
length behind RTs to be 12,000 feet so when customers get to that point,
they get terrific line speeds.”

At 39 percent, RTs substantially expand BellSouth’s DSL presence outside of
the normal coverage area provided by COs, which reach out 15,000 feet only
if there is top-notch copper wiring connected to the consumer’s home. De
la Vega plans for that number to increase, as the company continues work on RT
deployment around its coverage area, which is located in the Southest
area of the U.S.

Also helping the Bell’s cause is the promotions run in the fourth quarter
that gave customers an incentive to sign up for broadband Internet. A free
DSL modem (the program ends at the end of the month) and the first month of
DSL free helped convince people to upgrade from dial-up or migrate from cable.

BellSouth’s success is a lesson the other incumbent should take to
heart. For one reason or another, the other three have been slowing down
their DSL deployment around the country, a strategy that could backfire.

  • SBC has all but given up on Project Pronto, an initiative that
    was supposed to eventually cover 80 percent of its coverage area
    throughout the Mid- and Southwest. Executives blame the government for
    too-stringent regulation that makes expansion too costly to continue.
  • Qwest abandoned the DSL market entirely after reporting it would see
    zero
    growth in 2002
    , handing over its high-speed management to the Microsoft
    Network and focusing more on business T-1 services.
  • Verizon has been slow to embrace an aggressive RT deployment, focusing
    instead on keeping the customers it has happy, many of which have complained
    loudly and often of service outages and poor customer service.

De la Vega, who is taking over as president of BellSouth Latin America, is
confident BellSouth will continue its RT deployment throughout the U.S.,
eventually covering 76 percent of the market and resulting in a total of
1.1 million customers by the end of 2002.

BellSouth started the fourth quarter of 2001 on a bit of a bad note. DSL
acquisitions (like much of the high-tech industry), either through its own
retail offering or that of its affiliate Internet service provider (ISP) or
competitive local exchange carrier (CLEC) partners, were lagging in the
third — partly due to the events of Sept. 11.

De la Vega downplayed recent events, saying history shows DSL growth is
cyclical in nature; acquisitions are generally slower in the
third quarter and pick up in the fourth. He expects the same to happen in
2002.

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