Verizon Expands DSL Lines as MSN Shifts Strategy

Regional Bell operating company Verizon , which is preparing to launch a co-branded broadband offering with Microsoft’s MSN, is expanding the number of lines equipped for delivering broadband access by nearly 30 percent. The goal is to make its DSL service available to 10 million homes by the end of the year.

The upgrade comes as MSN signals a switch in its Internet strategy to focus more on delivering software products over broadband and through its MSN portal, while eventually leaving the dial-up access part to other providers.

Verizon said it is adding more than 10 million new lines to the 36 million that are now equipped with DSL service. The upgrade would extend the Verizon Online broadband service to about 80 percent of its regional markets, primarily in suburban and rural communities.

“I certainly think it’s mutually beneficial for us,” said Bob Visse, MSN’s marketing director. “The more lines Verizon can reach, the better the relationship is for the MSN/Verizon co-branded product. We’re exited that the largest DSL provider is partnering with us for distribution of MSN.”

Verizon and MSN are still working out some technical issues involved with integrating their products for a co-branded DSL offering, the companies said, which pushed the launch schedule to the second quarter instead of the initial plans for a first quarter launch.

When it does roll out by mid-year, the product would showcase MSN’s recent strategy switch to focus more on providing Internet-based software services, and on content and services provided through the MSN portal.

“We’ll be redoubling our efforts in this area of Internet software subscriptions over a broadband connection,” Visse told “We see this market tipping more toward the mainstream broadband market, and we’re starting to go after that market with more of our resources and marketing dollars.”

Visse was recently interviewed by an analyst for tech research firm IDC, whose report about MSN heralded a “strategic shift” away from driving dial-up subscriptions.

MSN counts about 8 million dial-up subscribers that it is working to coax over to broadband subscriptions through partnerships with ISP providers such as Qwest Communications, cable company Charter Communications and Verizon.

The Verizon offering would be a key part of that strategy, with offers to coax dial-up users to instead use their DSL-ready phone lines for a high-speed connection, helped by MSN’s portal which counts some 65 million customers visiting the site each month.

But Visse downplayed the change as more subtle.

“I think the assumption that we’d be moving quickly to get out of dial-up is not spot on,” he said in an interview. “However, as the business matures and broadband starts to move more and more mainstream, there will be a point when we need to evaluate if we need to be in the narrowband business.” But that’s years down the road, he added, and in the meantime, “we think the dial-up market could integrate well with a broadband home.”

Verizon’s spokesperson Bobbi Henson said the co-branded offering with MSN is more than just about the development of a co-branded portal. “It’s about the
entire customer experience, from installing the kit, getting it up and running, and then experiencing the wonderful new content, services and applications that will be up there,” she said. “For people currently on dial-up and for others looking to change to
another provider, we think it will be an attractive service.”

The Baby Bell now counts about 1.8 million subscribers to its
DSL-broadband service, which currently ranks it as the largest provider of DSL service among the telcos. According to Jupiter Research (which is owned by the same company that owns this publication) the residential broadband base is about 15.7 million subscribers. Although most of the providers are on the cable side, the uptake in broadband sign-ups is growing for both cable and DSL modems.

Research firm Strategy Analytics, for example, recently noted that global sales of broadband modems in 2002 jumped by 52 percent to 26.3 million units.

About 75 percent of U.S. homes now have Internet access, and the firm estimates that 27 percent of them presently use broadband connections. By 2008, that number is expected to grow to 64 million subscribers or 59 percent of all U.S. homes.

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