Covad Continues Network Expansion

Covad Communications, Inc. Wednesday
connected four new metropolitan markets to its digital subscriber line
services in Bell South Corp. territory.

Covad successfully deployed broadband services in
Louisville, KY, New Orleans, La., Jacksonville and Tampa, FL.

Tom Wagner, Covad president and general manager, said expansion into the
Bell South region further builds out its network of more
than 100,000 DSL connections nationwide.

“This expansion will enable Covad to bring high-speed Internet access to an
additional 1.4 million households and 150,000 businesses,” “Our recent
rollout announcements in the Bell South region is a continuation of Covad’s
mission allow business and residential customers nationwide to harness the
power of the Internet.”

Covad DSL service will ultimately be available to more than 26,000
businesses and 257,000 households in Louisville, 41,000 businesses and
352,000 households in New Orleans, 26,000 businesses and 262,000 households
in Jacksonville, and 55,000 businesses and 561,000 households in Tampa.

Covad sells DSL services through both local and national Internet service
providers in the U.S. Its aggressive deployment of DSL services is due in
large part to the Federal Communication
Commission’s
line-sharing order made late last year. The federal
regulator ruled that incumbent phone companies must unbundle elements of
their networks and share high-speed DSL access to create competition in the
broadband market.

Covad offers two different DSL products designed for business and home
high-speed connectivity. But Covad could incur a bit of consumer fallout
from free DSL offers if the advertising-based providers can establish services.

According to Cahner’s In-Stat Group,
free DSL service providers that fall short of meeting customer service
expectations have several major hurdles to overcome in nabbing a piece of
the market.

In-Stat research indicates that despite public enthusiasm, free DSL has
proven to be less glamorous than once heralded. While the service itself
will be free, consumers will still have to purchase DSL modems.
Additionally, subscribers are subject to a constant barrage of
advertisements and bandwidth-hogging streaming messages that could slow
down network performance.

Even if consumers accept these potential privacy and speed-inhibiting
conditions, businesses will not. Consumers may have to wait a while before
they can get free DSL service, as providers like Digital Broadband Group, Inc., iNYC Corp., and Staruni Corp. remain in the early
testing phase and have yet to deploy fully free high-speed Internet access
in any U.S. market.

Although some of the free DSL companies report thousands of users have
lined up for service, In-Stat foresees that free DSL providers will have a
difficult time meeting both customer satisfaction an business profit
expectations.

In-Stat also forecasts that the DSL market will experience exponential
growth, amounting to approximately 5.4 million ADSL and 3.1 million SDSL
subscribers by 2003. That equates to a 77 percent growth rate
year-over-year in a market that Covad, and other fee-based DSL access
providers are better prepared to serve.

The study indicates that it costs $150 to $200 per year plus initial
installation costs to support a single DSL user, a cost that cannot be
supported solely by advertising revenues collected by free DSL providers,
which leaves fee-based DSL services to initially dominate consumer and
business market segments.

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